By Geoffrey Smith
Investing.com -- Cryptocurrency lender Nexo said on Monday it had offered to buy the assets of rival Celsius, following what it called the "apparent collapse" of its peer over the weekend.
Celsius had suspended customers' withdrawals of Bitcoin from their wallets earlier on Monday, citing "extreme market conditions." The move had triggered a fresh wave of selling across the cryptocurrency space, with many enthusiasts fearing a rerun of the Terra-Luna debacle a month ago when the algorithmic stablecoin Terra and its associated Luna token collapsed.
"Nexo, its partners, and affiliates could readily acquire from Celsius part or all qualifying, outstanding collateralized loan receivables secured by their corresponding pledged cryptocurrency collateral, subject to Nexo’s risk management and collateral requirements," Swiss-based Nexo said in a Letter of Intent that it published on its website.
Nexo, like Celsius, has grown rapidly by attracting the users with promises of high token-based rewards. Even after imposing caps on its returns last week, it still offers users annualized returns of up to 12%, a level that implies a substantial degree of risk. Nexo didn't specify what it might be prepared to pay for Celsius' assets, noting only that the price would "be subject to the completion of a successful financial and legal due diligence process, and in line with possible impairments and nominal value adjustments."
Celsius' own token fell by over half on Monday, and has lost over 95% of its value in the last three months as tightening financial conditions around the world have made it more expensive to bet on digital assets with traditional fiat currency.
Nexo's token also suffered badly by association. It fell 19% to its lowest since January 2021 and has lost around two-thirds of its value since the Terra-Luna fiasco. Despite this, Nexo said in its letter that it is "in a strong liquidity and equity position as evidenced by the only real-time reserves attestation of a blockchain finance company." Its reserves are audited by the U.S.-based accountancy firm Armanino.
Irrespective of the value of Celsius' assets, Nexo, as a provider of similar services, has an interest in avoiding another messy default by a high-profile player in the same space, so soon after Terra-Luna's collapse. Ownership of Celsius' assets would give Nexo greater insight into the extent to which its own balance sheet could be hurt by any failure by Celsius to meet its obligations. A disorderly default would likely embolden a harder clamp down on crypto lenders by regulators, who have already signaled objections to what they say amounts to unregulated securities lending.
Nexo gave Celsius a week to consider its offer.