As you know, cryptocurrencies are a real place for monetary innovation, it is also an intense speculative market. It is difficult to understand why an asset is going up or down. Today we look at the price of Nexo Token which seems to benefit from the same increase as the price of Bitcoin.
Bitcoin and Etherium have benefited from a strong rise in crypto ETFs during 2024. Despite this rise, most other cryptocurrencies have not followed the same movement. Some assets have even been very low in price over the last 6 months. To fully understand this situation we need to go back. More precisely end 2023. In mid-September 2023, bitcoin began an ascent that ended in mid-March 2023 (yellow below). ETH also saw a more or less similar increase in the same period.
https://coinmarketcap.com/
Bitcoin then reached a cap of 71 300 which it never exceeded. Meanwhile, the vast majority of crypto assets have not followed this rise. The non-commencement of the ALT season has frustrated many crypto-enthusiasts. However, this phenomenon is not surprising since the rise in prices of BTC and ETH has been boosted by the arrival of new financial products. This is not the start of any bullrun. But why did some cryptocurrencies benefit from this rise? Well, no global answer exists, the increase of their price is linked either to their project, or to FOMO or to macroeconomic elements. The case of the Nexo Token is very interesting because it emerges from its price elements of trends that seem to repeat themselves. As a reminder, here is the evolution of prices of the Nexo Token. From mid-September 2023 to mid-March, Nexo saw a price increase similar to BTC (see yellow).
https://coinmarketcap.com/
Why does the Nexo generally follow the rise of Bitcoin?
The answer is on the Nexo platform itself. To earn more interest on their cryptocurrency (savings account system), users must hold an equivalent percentage in Nexo value on their account. The more they hold of Nexo Token, the higher their percentage return. The more they hold of Nexo Token, the higher their percentage return. When the price of Bitcoin increases, this percentage of collateral in terms of value decreases. Users are therefore naturally encouraged to top up their account with Tokens. If the market cap of BTC or more generally of all cryptocurrencies increases, the Nexo’s cap also increases by ricochet even outside bull run periods. However, when the prices of all cryptocurrencies fall, the interest to buy Nexo is very low, which will cause it to suffer a price drop similar to the rest of the market.
What lessons?
Nexo has a value that is highly correlated to the rest of the market, particularly Bitcoin. I notice however that like Bitcoin, Nexo records a long-term price increase whatever the short and long-term market variations.
