When it comes to Bitcoin, the main barrier to mainstream use is the volatile price. Microsoft started accepting Bitcoin, then stopped, and then welcomed it back. Bitcoin, which was intended to solve the currency inflation problem, has rather turned into a means of storing value. It’s too precious and too unpredictable for real-world usage.
The crypto community has tried to address this problem with stablecoins. Recently, GV (formerly Google Ventures), Bain Capital Ventures, Lightspeed Venture Partners, Andreessen Horowitz, and Sky Capital invested $133 million in Basis, a startup that created a cryptocurrency with a stable, predictable value. Basis tackles the volatility problem by creating more of its currency when demand is high, and reducing the supply when demand falls.
Of course, Basis is not the only stablecoin out there – Basecoin and Seignorage Shares are two others. Stablecoins must determine their own price rather than be priced by supply and demand, and this is a tricky thing to maintain.
However, people want Bitcoin. It’s no secret that Bitcoin was the first generation of blockchain technology, and with solutions such as NEM and Cardano, we are already in the third. Yet people want Bitcoin – it was the riches it brought that made blockchain tech famous in the first place.
What Makes People ‘HODL’?
Tom Lee, the only major Wall Street strategist to issue Bitcoin price targets, has predicted that the cryptocurrency will hit $20,000 by the middle of the year and $25,000 by the end of 2018. Other people, including the CEO of Pantera, a hedge fund, have offered similar estimates.
As this year’s tax day approached, for instance, the price of Bitcoin fell because many people had to cash in their crypto in order to pay their taxes. Regulatory, tax, and legal issues make fiat-based trading onerous and costly for crypto traders, and many crypto exchanges do not even offer the ability to use fiat.
In the US, there is one more reason to hold your crypto: if you hold for at least a year, you can pocket long-term capital gains, which tend to be taxed lower than short-term gains.
The term ‘HODL‘ gained popularity in the Bitcoin community when an apparently inebriated user posted “I AM HODLING” rather than “HOLDING”, and his typo has since become a favorite mantra of Bitcoin investors when talking about holding onto the currency rather than selling it.
What’s The Incentive?
“There was no way to enjoy your crypto wealth without selling it,” says Antoni Trenchev, co-founder of Nexo. “It was a major problem for us. If you want to hold onto your bitcoins, for instance, but need cash, you can get an instant crypto-backed loan from Nexo now, rather than selling.”
Effectively, if a consumer wants to buy something of value and their crypto asset’s value is increasing, they aren’t forced to sell it; they can just get a loan from Nexo. To get a crypto-backed loan, the consumer can transfer their coins to the Nexo Wallet, allowing for calculation of their loan limit. The loan will then be made immediately available by bank transfer, credit card, or even another cryptocurrency. When the client repays the loan and the interest, their loan limit increases and they can also withdraw their crypto from the wallet. In a market where Bitcoin’s price is soaring, this really pays off.
A Strong Foundation
Nexo is not another startup – Credissimo, a leading fintech firm having served millions of customers across Europe for over 10 years, powers it. It’s no wonder that Michael Arrington, founder of TechCrunch and Arrington XRP Capital, is on their board.
Nexo brings two very large innovations to the crypto space. First is the product – it is the world’s first provider of instant crypto-backed loans. Secondly, the NEXO Token is the first SEC-compliant, asset-backed security token that pays out monthly dividends of 30% of profits to token holders.
One of the three largest crypto-related groups on Telegram, Nexo has several thousand followers on Twitter and Facebook.
Its private and public pre-sales were oversubscribed by factors of 5 and 11, respectively, causing the main sale to be canceled. This is a signal of a pressing need in the crypto investment community.
In crypto, the only thing we can be certain of is that nothing is certain. Stablecoins try to minimize volatility, while loans offer a way around the problem by treating cryptos as investments. We have yet to see which solution will go mainstream – maybe both?