Warning: This Altcoin Could Collapse 50 Percent Under Regulatory Pressure!

Analysts fear that the NEXO price could come under pressure if regulatory actions in the US begin to intensify. Suspicions about the potential bankruptcy of crypto lending company Nexo are growing in the market. In this environment, the local altcoin risks losing half of its value by the end of 2022.

Altcoin on the brink of bankruptcy?

For those who don't know: Eight US states filed a cease-and-desist order against Nexo on September 26, alleging that the company offered unregistered securities to investors without warning them about the risks of financial products.

In particular, regulators in Kentucky accused Nexo of being insolvent. They also stated that without its native token NEXO, the company's 'liabilities would exceed its assets'. As of July 31, Nexo had 959,089,286 NEXO in its reserves. That's 95.9% of all available tokens. Mike Burgersburg, an independent market analyst and author of Dirty Bubble Media Substack, comments:

THIS IS A BIG, BIG, BIG PROBLEM BECAUSE A VERY SIMPLE MARKET ANALYSIS SHOWS THAT NEXO CANNOT MONETIZE A SIGNIFICANT PORTION OF THESE TOKENS. GIVEN THIS FACT, THE ACTUAL VALUE OF NEXO TOKENS ON NEXO'S BALANCE SHEET IS PROBABLY CLOSE TO $0.

Comparisons with Celsius

Nexo holds the vast majority of the NEXO token supply. Therefore, Mike Burgersburg claims that Nexo is facing bankruptcy risks. Celsius Network also held more than 50% of its native token CEL. As you know from cryptoify.blogspot.com, it is now bankrupt. In this respect, Burgersburg draws comparisons with crypto loan company Celsius Network.

Top 100 NEXO holders collectively hold 95.53% token supply / Source: Etherscan

After attracting deposits and collateral from customers, Celsius kept more than 90% of the total CEL tokens in circulation. This made CEL extremely liquid and therefore volatile. In other words, CEL became a highly imperfect asset to fix Celsius' troubled balance sheets.

"The NEXO token is even more illiquid than the bankrupt Celsius Network's CEL token," Burgersburg says. He also notes that the token's average daily trading volume reaches less than 1% of its market cap. However, a Nexo spokesperson denies the allegations, explaining that the data they provided to Kentucky regulators was for one of Nexo Group's entities. In this context, the spokesperson makes the following statement:

WE CAN CONFIRM THAT ON A CONSOLIDATED BASIS, NEXO TOKENS REPRESENT LESS THAN 10% OF THE COMPANY'S TOTAL ASSETS. THIS EXCEEDS THE COMPANY'S LIABILITIES, EVEN EXCLUDING THE COMPANY'S NET POSITION IN NEXO TOKENS.

The company's spokesperson also talks about why Nexo holds more than 90% of the NEXO supply. Noting the token's economics and utility, he says they create natural incentives for customers to keep their tokens on the platform. In this regard, he makes the following explanation:

BY HOLDING NEXO TOKENS ON THE NEXO PLATFORM, CUSTOMERS EARN HIGHER INTEREST RATES ON THEIR DIGITAL ASSET HOLDINGS. THEY CAN ALSO USE THEIR NEXO TOKENS AS COLLATERAL, EARN INTEREST ON THEM AND EXCHANGE THEM DIRECTLY ON THE NEXO PLATFORM. THE SAME GOES FOR TOKENOMICS OF COMPANIES WITH SIMILAR VALUE PROPOSITIONS, SUCH AS FTT, BNB AND CRO, WHICH ARE PREDOMINANTLY HELD ON FTX, BNANCE AND CRYPTO.COM RESPECTIVELY.

"NEXO likely to collapse by 50%"

According to crypto analyst Yashu Gola, the fear, uncertainty and doubt surrounding rumors of market volatility or tight regulation against crypto lending platforms is likely to create negative investment sentiments towards NEXO. "Unfortunately, the token's technical setup suggests the same," the analyst says. He then goes on to explain this situation as follows.

Notably, the altcoin price has been like an ascending triangle on the longer time charts since June 12. Ascending triangles are considered bearish continuation patterns in a bear trend, which makes NEXO susceptible to extreme price declines.

According to the rule of technical analysis, an ascending triangle resolves after the price falls below the lower trendline. It also continues to fall in the same direction until it reaches the level with a length equal to the maximum height of the triangle. This setup is as in the chart below.