Looking into Nexo's business model it's increasingly clear to me that they are insolvent due to chainlink's recent rise.
A brief introduction to how these crypto deposit/lending sites generally work, or are supposed to work.
You deposit a cryptocurrency. Someone else wants to borrow it against their own cryptocurrency as collateral (reasons typically are to get some funds without selling their own crypto, or for margin trading). The borrower pays an interest rate, the lender receives a lower interest rate and the middleman (in this case it would be nexo) takes a large cut of the difference.
A decentralized version of this is Aave. Centralised versions are crypto.com and nexo.
Typically stablecoins have the highest borrow and lending interest rate, because demand to borrow them is highest. Next is typically bitcoin/ethereum, and most ERC tokens are very low because there's little demand to borrow them. Chainlink has been close to 0 on the likes of Aave as well as binance for months, while nexo pays 5%.
Now, nexo's business model is a bit different. While they take deposits in LINK and pay 5% on them, it seems they do not lend out LINK or other cryptocurrencies. Instead they lend out fiat.
This means they are not lending out assets deposited by other users, like Aave and binance. Instead it would mean they are selling user deposits to fiat and then lending out said fiat.
Chainlink has been trading as low as $1.8 this year and mostly in the $3-5 range. No doubt chainlink deposits are very popular with nexo, there are lots of long term holders and the 5% interest rate they claim to pay is much higher than elsewhere. So this likely means they've taken a lot of LINK deposits and sold them to fiat.
Yes, they sell client funds, and that's exactly what happened. We've argued through this time and time again. Doesn't matter how many times we say it though, someone has got to get that info to the normies.
User A deposits 1 BTC. User B borrows 1 BTC. A receives 1%, B pays 2%, and the middleman/nexo would receive the 1% cut.
Nexo doesn't care which way the price of bitcoin moves. It has one bitcoin as a receivable (that which B has borrowed) and one bitcoin as a payable (that which A has deposited). It's overall exposure is zero.
However, it's clear that nexo's business model is:
User A deposits 1000 LINK Nexo sells 1000 LINK for $5 each User B borrows $5000
So now, nexo has 1000 LINK as a payable, and 5000 USD as a receivable.
As you can see, nexo is essentially opening a large synthetic short on every asset that is deposited with them.
Now LINK goes to $8. Suddenly nexo has $5000 in receivables and $8000 in payables. Now consider this but with millions of dollars of LINK deposits. Nexo is now insolvent.
Look at the site yourself (if you trust it, I understand if you don't). You can confirm all this yourself. Their business model is not sustainable. This is the first crack. And absolutely explains why they have released the fraudulent short report. It's because they are close to insolvent.
Do you think it's a coincidence that they recently stopped paying interest in LINK and are paying in USD?
A corollary of the above is that your LINK deposits , or any deposits on nexo are not safe. They likely do not have enough LINK to honour all deposits.
Jaxson Campbell
there's very little reason why anyone would borrow chainlink let alone 5% interest
absolutely not sustainable lmao nobody sane would short link long term
Zachary Clark
My question is why the fuck would any company think that a scam like that would actually work, and why the fuck they would pick a superstar performing token like LINK.
Andrew Campbell
Greed
Jose Barnes
They are retarded bureaucrats from traditional finance that achieved their success through political connections and corruption. They had no idea what they were getting into.
Robert Collins
You’re right, except for the part where they are near insolvent. There were some big investors in nexo and they are sure as shit willing to pile drive link into the ground to ensure nexo lives to see another day. I’m short because of that but only to increase my link stack for when this all blows over.
Jaxon Jackson
Thinking about it, there a chance they sold all link before the initial pump. With that in mind the link borrowed from aave could be a fraction of what they sold. Op could be onto something.
John Carter
The reason is nothing to do with chainlink being a particularly good target.
Nexo likely received a load of chainlink deposits. Possibly millions of LINK. Chainlink has an attribute that there are lots of long term holders who would all love to receive interest on their LINK. The recent price increase in LINK means nexo can’t afford to pay back all their LINK deposits.
Jack Hernandez
this is fucking interesting bros
i still struggle with all the fud being true though
Gabriel Bailey
Damn that's fucked, shit like this is why my linkies never leave my wallet
Easton Rivera
This is true. They likely sell LINK as it comes in. Which means they’ve been selling as low as $1.80 and are essentially short since then.
They do not have unlimited firepower. Chainlink is an extremely liquid cryptocurrency. Most of the holders are long term. They can only manipulate the price so long, and when they short it they are only increasing their own risk.
All it takes is one large positive news piece on LINK to seal their fate, and with oracle partnership, Microsoft partnership likely end of August and staking around the corner it could come very soon.
Adrian Gutierrez
Go to the archives and read user, go back as far as 2017.
Isaiah Murphy
The FUD has been thoroughly debunked, here’s a good twitter thread on it. Note that Zeus capital had absolutely no rebuff to this.
I can definitely understand the doubling down on the Zeus fud now, they’re desperate. Oh boy this is going to be a fun couple of months.
Easton Sullivan
Do your bit user, buy more LINK. I have $10k on the way to my coinbase account, should arrive today.
Together we will take these scammers down.
Xavier Lewis
You are not going to break them with your lunch money. You need to get this to news outlets that will take this information to whales that are self-interested in fishing for liquidations.
Levi Brown
Good point.
Any suggestions?
Landon Robinson
Pester Chainlink Twitter to talk about it. Mail/tweet at news publications. Write a comprehensive compilation of all incriminating evidence we have Linking NEXO to this. Maybe we can have a thread for writing that where everyone chimes in to make sure we don't miss anything.
Jack Gomez
Based thread. Well articulate OP. Fuck this faggot I hope this ruins him.
BTC maxis would. ETH maxis would. Jeetcoin of the month maxis would, too. Crypto has far and away the dumbest money in all financial markets.
Connor Taylor
The fact is until the recent short report when nexo themselves went short, there was 0% utilisation on aave for chainlink borrow.
I can’t even see an option to borrow chainlink on nexos website. Which basically confirms they are selling it for fiat
Landon Phillips
Why would you buy LINK instead of SWAP? 5% of LINK's MC and holders are moving directly over to swap. At that point SWAP will be $3 per. Research SWAP and tell me which coin will double it's MC first? Leaving a cult is hard but you can do it. Become a 5%er before it's to late
Elijah Russell
Oh, I don't disagree with the analysis presented in this thread, I'm just saying there are lots of absolute retards who would short LINK just on principle. That principle being a vow a poverty, one assumes.
Gavin Hughes
The adults are speaking, the children’s area is over that way
Easton Perez
Oh fuck off with your swap you insufferable curry nigger.
Owen Peterson
Been buying every other day, even got my dad in on it. We’re all gonna make it.
Levi Carter
Which means there's a MASSIVE short squeeze in the making. Imagine if that bald headed fuck Simeon triggered the Singularity accidentally because of his stupidity.
Ethan Wright
you retards know what they did is illegal right? i know SEC lawyers in crypto and they knew right away what it meant
Ryder James
Until I see an actual court filing I don't believe they're doing shit about it and I believe you know fucking nothing about anything.
Isaac Sanders
But... why male models?
Benjamin Young
This (the report, everything) might unironically be to push the price up, not to power a short position... Every short order has to close eventually as a buy, and all of this, including the price action and an upcoming event, feels like a group trying to get as many short positions as possible formed among investors so theres liquidity all the way up to tap into come late august. They specifically want shorts, they aren't trying to get LINK holders to sell, just shorts hoping to hold their position till $.07.
John Fisher
Do you guys think this is the dip i am poorfag and i want to buy more
Kevin Nelson
But, why male models?
Austin Morris
SEC have specifically said they are going after market manipulation. Couple that with being dumb enough to literally copy a real investment fund's name, that is based in the same country as Nexo, and I fucking guarantee this will see litigation.
Nathan Perez
"The dip" is any time LINK is less than $1000 USD per token.
Evan Phillips
kindly do the needful sir
Brody Perry
Wait for sub $6. There have been multiple coordinated attempts to push, and have it stay, under $6. Doubt they have given up. Watch for tonight around 10 PM euro time for another attempted dump just like the past 2 days.
Aiden Lopez
It’s not. It’s nexo trying to cover their asses because they’re insolvent
