Comparison of the best and worst features of the two largest cryptocurrency lending platforms: Nexo and Celsius
Cryptocurrency lending is a great opportunity for p2p lenders. It’s also potentially confusing. I’ve been doing lots of reviews of crypto lending platforms recently. And the CeFi (centralized finance) platforms tend to have lots of features in common that can make choosing between them difficult. We recently looked at both Nexo and Celsius. Before we go any farther, I’ll give you the spoiler now. Both of these platforms are good choices for investment. However, they do have some differences that might lead you to prefer one or the other. Half of our features had either a major or minor difference and half of those (25% total) were major differences between Nexo and Celsius. Yet given their similarities, one easy solution could be to diversify your risk by putting a little bit in a few platforms. But that’s lots of signups, emails, ID verifications, etc so it’s understandable if you might NOT want to do that. So I thought at this point, it might be helpful to compare and contrast two of the largest and most popular CeFi cryptocurrency lenders: Nexo and Celsius. Before we get to the tables and the explanations in more detail, I thought I’d describe what we are looking for. I decided that the most important features for lenders are:
- Platform safety
- Interest rates you can earn, and
- Ease of use to send USD or EUR and then lend it or the cryptocurrency of choice
With these 3 things in mind, I looked at 30 different features to compare the two platforms. They range from simple ones like ‘Can you wire Australian Dollars (AUD)?’ to reflect if non-USD and EUR currencies can use the platform easily to ‘Does the platform use an insured custodian to hold your crypto when they lend it out?’ I divided the topics into 3 categories even though they overlap:
- Borrower Features
- Lender Features
- Company Information & Operations
Now let’s see how they did.
Borrower features may not seem that important if we are lenders, but in fact, they are very important. As lenders, we need a combination of features and benefits to attract borrowers but not so attractive that it makes it riskier for us to lend to them on the platform. For example, a 50% LTV (loan to value) loan backed by collateral is safer for us than a 90% LTV loan is, right? At 50% LTV, we have lots of downside protection in case the underlying crypto declines in value. With that in mind, let’s look at the borrower's features.
|Highest LTV on Loans (Least Protection)||90%||50%|
|Loan Terms||Credit lines||Loans up to 3-year term|
Of the 3 features listed here (and in the tables below), those listed in Red mean there is a meaningful difference between the 2 platforms. Here’s what that difference in LTV means to you as a lender. Someone can place $10,000 in collateral to borrow $5,000 on Celsius and $9,000 on Nexo. That’s a big difference. Is that a difference you are comfortable with? Are you compensated enough for this extra risk on Nexo? Only you can answer this. The 2nd difference above is a difference in the loan structure. One is a standard loan with a term of up to 3 years, while the other is a credit line that can be drawn upon at any time and any amount up to the limit. The biggest difference in these structures for you as an investor is that with credit lines at Nexo, your payments are promised to you at a fixed interest rate but the borrower might not be making any payments. This means you are relying on Nexo to have the cash available to pay your fixed interest rate. With the loan structure at Celsius, the borrower either pays and Celsius pays you or the borrower does NOT pay and they are liquidated to pay you. This is a potentially significant difference that you should understand before investing.
As lenders, the features offered to lenders are important. We want a good interest rate on our money if we are going to sign up to use the platform. We want flexibility and convenience too if it’s not too expensive.
|Bitcoin BTC Interest Rate||6%||6.2% up to 1 BTC, 3.5% after|
|Can I earn interest on BNB (Binance Coin)?||Yes||No|
|Can I wire Australian Dollars (AUD) to buy crypto?||No||Yes|
|Fiat Currencies||EUR, USD, GBP||Many for deposits but must convert|
|Interest paid in Fiat Currency?||Yes||No|
|Other Cryptos Interest Rate||6-12%||2-13.99%|
|Spread/Net Interest Margin on $3000 stablecoin loan||(13.9%-10%) 3.9%||(8.95%-8.88%) 0.07%|
|Buy with a Visa Credit/Debit Card||Yes||Yes|
|Cryptocurrencies||7 stablecoins, 14 cryptos||13 stablecoins, 26 cryptos|
|Easy to Buy Crypto w USD or EUR||Yes||Yes, from Custodian|
|Insurance||Yes||Yes, from Custodian|
|Stablecoin Interest Rate||10%||8.88%|
|Trading Offered?||Yes||Yes with integrated partners|
|Wire Transfer or SEPA Accepted||Yes||Yes with integrated partners|
Here we have 8 different features in red so there are 8 ways Nexo and Celsius are different when it comes to where you should invest your money.
The Opposing Positions between Nexo and Celsius
Here are the features that are directly opposing each other. They are:
- Can I earn interest on BNB coin?
- Can I wire AUD (Australian Dollars) to the platform to buy crypto?
- Can I lend fiat currencies?
- Can I receive my interest payments in fiat currency?
Interest on BNB coin?
BNB coin (the Binance exchange cryptocurrency and currently the 4th highest market valued cryptocurrency) is a proxy for other cryptos popular with investors that aren’t Bitcoin or Ethereum. So despite Celsius offering payments in 26 cryptos to Nexo’s 14, Nexo represents more of the larger, popular cryptocurrencies that investors may already own or that they find desirable for receiving payments. This is an important difference as your crypto of choice may be available on one, both, or neither of these platforms.
Wire AUD to the Platform?
Like the BNB question, this one is a proxy question too. It’s representative of a major fiat currency that is not the USD, EUR, or GBP. So how easy is it for a holder of this type of currency to get their currency to the platform, exchange for crypto, and then lend? The answer here is that you can’t on Nexo and you can on Celsius. But there’s a wrinkle to this….. Celsius does not accept AUD or any other fiat currency directly like Nexo does for GBP, USD, and EUR. Celsius works with a few integration partners, and the biggest two are Wyre and Coinify. So what you are doing is using Coinify’s service to send your AUD (or another fiat) and buy crypto and then your crypto is there on Celsius to lend. This service is not directly from Celsius, and you should understand this as these partners charge fees for the convenience of having access to their services within the Celsius app. But the result is more people can send their ‘home’ currency to Celsius to get the crypto they need to lend.
Can I lend fiat currencies on Nexo or Celsius?
This one is pretty simple and direct as you can on Nexo with their 3 fiats (GBP, USD, and EUR) and you can’t with Celsius. While Celsius accepts more fiat currencies, due to their work with the integration partners mentioned above, they ALL must be converted to crypto.
Can I receive interest payments in fiat currency on Nexo or Celsius?
This one is straight forward too. You can on Nexo for the 3 fiats they support and you can’t on Celsius.
The 4 Features With Minor Differences between Nexo and Celsius
The first of the minor differences is the rate the platforms pay on Bitcoin deposited with them. For the first 1 BTC (~$32,000 at the time of writing), the interest rates are nearly identical at 6% and 6.2% respectively. The difference is at more than 1 BTC, which is a lot of money for most people to deposit to a lending platform. Nexo’s rate stays at 6% while Celsius’ rate drops to 3.51%. This is a big difference and creates a disincentive to deposit larger amounts on Celsius.
The second difference is the frequency of the interest payments. Nexo is daily while Celsius is weekly. Not a big difference, but something to know. The third difference is the range of interest rates on other cryptos. The platforms have different ways of calculating what interest rates to pay on cryptos other than Bitcoin and Ethereum. Here are a couple of examples:
- Polkadot (DOT) pays 6% on Nexo and 8.86% on Celsius
- Litecoin (LTC) pays 6% on Nexo and 4.08% on Celsius
- EOS pays 6% on Nexo and 4.45% on Celsius
- Stellar Lumens (XLM) pays 6% on Nexo and 3.10% on Celsius
These help us see that our preference of what cryptos we want to receive our payments can vary from platform to platform. The fourth difference is about Net Interest Margin. Net Interest Margin is the difference between the rate you are paid for your deposits and the rate a bank or lender charges a borrower. This is one of the main ways a bank or lender makes money. A deposit and loan of stablecoins show a Net Interest Margin of 3.39% for Nexo and only 0.07% for Celsius. You might think who cares as it’s up to the platform to decide or you might like that Celsius offers lower rates (by margin) to their borrowers. But a reality we as lenders have to face is the success of our investment is tied with the platform’s success in making money on loans. With that in mind, do you think maybe Celsius doesn’t have to pay as much because they are using our coins for something else? Well, the answer is they are, as you will see below.
Company Info & Operations
With all CeFi platforms, not just Nexo and Celsius, how the company operates is important because if they go out of business, there’s a good chance your investment is a total loss.
|Hypothecate Your Crypto?||Undisclosed but likely||Yes|
|Integration of APIs?||No||Yes|
|They trade with your coins||Maybe||Yes|
|Offer a Debit or Credit Card?||Yes, debit||Yes, Credit card coming soon|
|Offer Payment Features directly from your Account||No||Yes|
|Country of Regulation||SUI, US||US|
|ID verification (KYC) Know Your Customer Required?||Yes||Yes|
|Mobile App for ioS and Android||Yes||Yes|
|Is Staking their token available?||Yes||Yes|
Here we have 5 differences with three of them minor differences and two that are opposing. Two of these differences are most important: Hypothecating and Trading Your Coins. Hypothecating assets is one of the problems of the legacy financial system. It’s why The Great Recession was so damaging to so many as many banks and financial institutions had assets tied up with other institutions. This is one of the problems Bitcoin was created to fix in 2009. Celsius, as part of their institutional lending business, hypothecates your coins and also trades with your coins in futures or swap contracts. Crypto power users will be (and are) philosophically against this practice but others may or may not care depending on how well the platform manages its risk. Currently, no evidence exists that Nexo does this too but there is reason to believe they might hypothecate your coins as part of their institutional business. There’s zero evidence that they trade with your coins as Celsius does. While Celsius has insurance that covers coins in their custody, it’s unknown if their insurance covers these other activities or not. The third difference is card offerings that are linked to your account. Nexo has a debit card that is linked to your account available and Celsius is launching a credit card with crypto-based rewards deposited into your account. The major differences are:
- API Integration: Nexo doesn’t while Celsius does for the tech-savvy that like working with APIs
- Offering Payment features directly from your account: Nexo doesn’t while Celsius has its CelPay feature you can use to send funds to another Celsius user
Of the 30 total features we examine, half of them like KYC requirements, having their own token, and being regulated businesses are either exactly the same or similar. Eight of the 15 differences are major differences between the platforms in areas like loan structure or receiving payments in fiat. It’s these major differences that will help you decide which platform is best suited to your needs for crypto lending.