nexo zero-interest loan against crypto

[void]

thoughts?

Zero-interest Credit • Nexo

Unlock liquidity at 0% annual interest and zero fees without selling your digital assets. Discover the Nexo Zero-interest Credit.

nexo.com

 

[JohnnyDoe]

Smartly misleading.

You are basically issuing a zero coupon bond secured by your collateral. In other words, you sell convexity.
Nexo lends you cash, uses your collateral to earn yield, and retains discretion at maturity to roll you or force repayment.

This is a collateralized zero-coupon issuance where you are short multiple options (liquidity, timing, flexibility) and paid in upfront (long) liquidity. It is not free money.
Much similar to an old fashioned callable bond.

Better to look at transparent lending markets - see World Liberty Financial

 

[JohnnyDoe]

You can also run a few numbers to see why this is a good product for Nexo.
In my (too boring to post here) simulation, the product has an implicit APR of 7-8.5% paid via yield capture alone.
Add to that liquidation fees and rollover spreads in stress.
This offering, marketed this way, would be illegal in traditional finance.

I could do better 😏

For example, a yield-participating flex loan: "use your btc or eth as working collateral, get USDT, earn yield on your crypto, and keep the exit on your terms." APR around 10% but invisible to the retail 😛

 

[void]

This is a collateralized zero-coupon issuance where you are short multiple options (liquidity, timing, flexibility) and paid in upfront (long) liquidity. It is not free money.
Much similar to an old fashioned callable bond.

I didn't expect free money 😉... it just caught my attention and clearly crypto-collateralized products are playing bigger and bigger role - this is another creative product

the product has an implicit APR of 7-8.5% paid via yield capture alone.

it's not bad at all actually - there are other things (as you mention) to reflect to the real personal cost... however there are many potential customers that wouldn't touch their crypto anyways no matter what (for various reasons) and they have this element basically zero - it's fair to note that these holder are rarely willing to give control over their crypto to a third-party...

 

[Marty McFly]

Total lack of transparency is not good. I prefer WLF

 

[void]

Total lack of transparency is not good.

what kind of transparency are you talking about?

 

[Marty McFly]

what kind of transparency are you talking about?

How they use our collateral, including utilization %.
Total amount of collateral deposited.
Total number of borrowers.
Implied costs.
Etc.
All the kind of disclosures they you find on platforms like WLF.

 

[void]

How they use our collateral, including utilization %.
Total amount of collateral deposited.
Total number of borrowers.
Implied costs.
Etc.
All the kind of disclosures they you find on platforms like WLF.

I see, well... this lack of transparency feels natural for this kind of product, basically part of the deal and the "price" you pay for the service and illusion that you get zero-interest loan

customer get most likely different bitcoins back anyways (in terms of blockchain trace - btw this could be a desirable feature for somebody) - it's basically about giving up full control over the coins for a period of time in exchange for then giving up control over corresponding amount of fiat