2020 Annual Report: Rise of Crypto Banking Services and Nexo Case Study

Sunil Sharma Guides PublishedJanuary 20, 2021 | ModifiedFebruary 23, 2021

Crypto Banking Annual Report 2020- CoinGape
IMG Source: Medium, Crypto Banking Annual Report 2020- CoinGape

2020 Annual Report: Rise of Crypto Banking Services and Nexo Case Study

In the first quarter of 2020, the entire crypto market saw a massive crash as Bitcoin fell to the levels of $3500. Having said that, the following months gave a V shape recovery to Bitcoin, which can be attributed to the halving of the cryptocurrency. The recovery was an excellent sign of its prospects as the crypto market outperformed the stock market.

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Growth of Cryptocurrency Banking Amid the Covid-19 Pandemic

Almost every financial market took a major hit from the Covid-19 pandemic. Meanwhile, the newly established cryptocurrency banking market saw a steep growth after the steadiness of 2019, thanks to the pandemic.

The impressive returns attracted investors and wealth mangers.  With crypto being accessible to nearly everyone with internet connection and little spare cash, many people found it apt to explore crypto, thus generating demand for crypto banking features.

Top Bitcoin Holders- Institutional Investors
Source: kevinbrooks.com, Top Bitcoin Holders- Institutional Investors

The growth of crypto banking, including lending and borrowing, witnessed a hockey stick rise as crypto users turned towards stablecoins to park their assets during the uncertain times. When we were halfway through 2020, all markets rallied, with many making all-time highs. However, the crypto banking market remained an out-performer.

“For instance, the slowly recovering US economy made it difficult for big giants like JP Morgan Chase to produce loan growth at a fast pace; not to mention interest rates being close to all-time lows. At the same time, in the crypto banking market, crypto lenders like NEXO were burgeoning.”

According to an article from Leeor Shimron, a writer from Forbes,

“emphasizing the crypto banking system’s growth and potential, crypto lending platforms would be a vital tool in future evolving technology.

Crypto banks allow users to gain up to 10% APY on their staked assets, compared to just 0.1% interest for holding assets at traditional financial firms. These attractive rates have made investors switch towards the crypto network from commercial banks during this contraction phase due to COVID-19.

Why Crypto Banking Is the Future of Traditional Banking?

In recent times, decentralized systems have put up strong competition for centralized banks when it comes to user benefits and security. Crypto lending platforms are changing the banking game, with results being quite evident. 

  • Crypto demand due to Covid-19

While Covid-19 has brought down many industries’ growth, it acted as a catalyst for the increased demand in crypto banking applications. Crypto lending had a feeble growth during its launch. All it needed was a boost, for people to realize its potential – which came from the unexpected pandemic. 

For example, in the later months of 2020, crypto was considered to be insurance against economic fallout, attracting major institutional investors. As a result, the benefits of crypto banking are reaching the mainstream public.

  • The Rise of Crypto in Developing Nations

Apart from the significant increase in volume in the developed markets, the crypto ecosystem is rapidly growing in the emerging markets. A conclusive example is Africa, where the growth of crypto usage was beyond expectations. 

Arcane Research‘s study, assisted by crypto exchange Luno, claimed that,

Africa is the most promising area for incorporating cryptocurrency due to its high inflation, volatile currencies, poor traditional banking infrastructure, and a decent chunk of the population in the tech world. 

Similarly, cryptos are shedding positive vibes in markets like Mexico and India. With the thriving of digital currencies in these nations, experts believe that crypto banking would revolutionize the traditional banking system in the year to come.

How Can Crypto Lending Disrupt the Credit Market?

A part of the crypto ecosystem includes the rapidly growing credit market which has the potential to disrupt the existing lending space by a huge margin.

A statistical report from CredMark issued in December 2019 showed that the crypto credit market delivered more than 6.4 billion USD in credit processed through September 2019. 

What’s more, since its emergence in 2018, the overall collateral issued for crypto loans has reached 10.5 billion. With similar occurrences taken into account, crypto analysts predict more than 25 billion worth of crypto credit processed by the end of 2022.

Central banks in developed countries have significantly cut interest rates, with some countries offering no interest to negative interest. 

In addition, the inflation rate is higher than the interest rate in the majority of the developing and developed countries; there is no real growth in value. This has led the DeFi market to reach great heights, as users are attracted by the promise of much better interest rates than with traditional banks for both lending and borrowing.

Source: DeFi Pulse

As it can be ascertained from the chart, crypto lending has seen an exponential rise in 2020 – the year of economic downfall – clearly indicating users’ interest and belief in the crypto credit market. Statistically speaking, the total value locked increased 23 times by the end of the year, in a timeframe of just six months.

In addition to crypto investors, when the general audiences begin to use crypto assets to access loan financing, the global credit market could become vulnerable to disruption.

nexo

Case Study – How Nexo Is Contributing to the Crypto Lending Revolution

  • How Does Nexo Work? 

Nexo is one of the platform that brought some serious utility to the digital assets held by crypto investors across the globe. Using Nexo, crypto holders get to borrow fiat currencies from Nexo’s Instant Crypto Credit Lines™ by staking their cryptos as collateral. 

What’s unique about Nexo’s lending services is that they differ from a standard loan where a user typically withdraws a fixed amount of credit and is obligated to repay it within a set period of time. With Nexo, once a client has added crypto to their account a credit line becomes instantly available to them. 

The UI of the Nexo platform is simple and very easy to navigate. Users can choose between using the platform’s desktop version on platform.nexo.io, or downloading the mobile-native Nexo Wallet App . The simple illustration below explains how lending and borrowing works on the Nexo platform. 

 

How to use NEXO
      How to use NEXO?

 

We hope the above illustration gave you a clear idea of how the Nexo platform works. A more detailed explanation regarding the above information can be found in this video

  • Other Features of the Nexo Platform

One of the primary benefits of using the Nexo platform is that it gives users the ability to monetize crypto assets without having to sell them. A couple of years ago, the only way people could profit from their cryptos was by selling them at a higher price than what they bought them for. But platforms like Nexo have changed the game, and now crypto holders can make the most of their assets. Some of the notable features of the Nexo platform can be found in the illustration below. 

NEXO features
NEXO features

Nexo users also get to earn high-yield returns with Nexo through their Earn on Crypto & Fiat suite. The Earn suite offers up to 12% interest on all idle assets in a user’s Nexo Wallet with interest payments made daily!

nexo

  • What Differentiates Nexo from other Crypto Lending Platforms?

No Fee Charged – There are hardly any platforms that don’t charge any fees. Some of its competitors charge high fees such as FX commissions, liquidation fees, origination fees, deposit/withdrawal fees, etc. Nexo’s #ZeroFess policy eliminates all such charges.

Dynamic Crypto Credit Lines – When using Nexo, if the value of your collateralized assets appreciates, the limit on your credit lines increases proportionately. This is a great offering, especially in the crypto market, because cryptos’ value appreciates and depreciates very quickly.     

Credibility – Nexo has processed over $5 billion since its launch in 2018. Currently, this company manages crypto/fiat assets worth close to $4 billion for over a million users around the world. Also, the team behind this company has 13 years of experience in the Fintech space. This speaks volumes about the credibility and reliability of this company.   

The NEXO Token – NEXO is the company’s native utility token with many use cases on the Nexo platform. It is considered the first-ever asset-backed, dividend-paying token in the world. Users are eligible to receive 30% of the company’s profits in the form of dividends. More than $9.5 million have been shared with NEXO token holders through dividends. 

That’s all for now on the topic of crypto banking and how Nexo has contributed to this industry. We hope you find the article informative. In case of any queries, please let us know in the comments below. 

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Sunil Sharma 156 Articles
Sunil is a serial entrepreneur and has been working in blockchain and cryptocurrency space for 2 years now. Previously he co-founded Govt. of India supported startup InThinks and is currently Chief Editor at Coingape and CEO at SquadX, a fintech startup. He has published more than 100 articles on cryptocurrency and blockchain and has assisted a number of ICO's in their success. He has co-designed blockchain development industrial training and has hosted many interviews in past. Follow him on Twitter at @sharmasunil8114 and reach out to him at sunil (at) coingape.com
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