NEXO risks 50% drop due to regulatory pressure and investor concerns

cointelegraph.com:

Crypto lending firm Nexo (NEXO) risks losing half of its valuation by the end of 2022 as doubts about its potential insolvency grow in the market.

For the unversed: eight U.S. states filed a cease-and-desist order against Nexo on Sep. 26, alleging that the firm offers unregistered securities to investors without alerting them about the risks of the financial products.

In particular, the regulators in the state of Kentucky accused Nexo of being insolvent, noting that without its namesake native token, NEXO, the firm'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 tokens in existence.

"This is a big, big, big problem because a very basic market analysis demonstrates that Nexo would be unable to monetize a significant chunk of these tokens," noted @MikeBurgersburg, an independent market analyst and author of the Dirty Bubble Media Substack, adding:

NEW: “IS NEXO NEXTO?”According to state regulators, Nexo is insolvent without counting $NEXO tokens on their balance sheet.This is the same situation Celsius Network was in… and basic market analysis suggests real value of their $NEXO is ~$0 https://t.co/txt1kOSydH

@MikeBurgersburg also alleged that Nexo faces insolvency risks because it holds the maximum chunk of NEXO token supply onto its platform. His allegations drew comparisons to Celsius Network, a now-defunct crypto lending firm that owned more than 50% of its native token, CEL.

Celsius ended up holding over 90% of the total CEL tokens in circulation after attracting deposits and collateral from customers. This made CEL extremely illiquid and, thus, volatile. In other words, CEL became a deeply imperfect asset for patching Celsius's troubling balance