The Nexo Booster: How & Why to Use It + a Quick Q&A
Who understands the Nexo Booster? Well, we feel like a large part of our community has found it to be a bit of a toughie to figure out. And, hey, we get it, our platform is getting increasingly sophisticated which is why our team put together a comprehensive article about the Booster, covering the following:
- Video Tutorial: Check out our video explainer to find out where the Booster is located in our app and how to navigate its flow.
- What If I Boost When…: What happens to your booster transactions if you have a credit line, or when your boosted assets’ value fluctuates.
- Why Boost?: What you can use the Nexo Booster for and what makes it a handy tool.
- Q&A: Questions from our community, answered.
The following section contains examples of exactly what happens when you use the Nexo Booster in various different scenarios, including if you:
- Don’t have a pre-existing open credit line.
- Have a pre-existing open credit line.
- Have an open booster position and your crypto’s price goes up.
- Have an open booster position and your crypto’s price goes down.
No pre-existing credit line
Let's say you want to boost 1000 USD in Ethereum and purchase more ETH with the boost. This is a single asset boost, but the same principles from this example apply to dual asset boosts with the difference that the asset you receive will be different than the one you start with, and there is one extra exchange transaction in the background of your boost (so you get some extra rewards 😉). In this example, let’s say you want to boost your 1000 USD worth of ETH to the factor of 2. Here’s a breakdown of what you’d get after finalizing your boost:
- Initial assets: 1000 USD in ETH
- Borrowed amount: 1019.99 USD (This is the extra $1000 for the 2x boost, plus the Nexo Booster fee)
- Loan-to-Value: ~ 51%
- Assets Collateralized from Boost: 2000 USD in ETH
So post-boosting, you end up with $2000 in Ethereum collateralized in your Credit Line Wallet and $1019.99 in crypto credit to pay off – this last sum is what you’ll accrue interest on.
Boosting with a pre-existing credit line
Now, if you’re already borrowing from Nexo using our Instant Crypto Credit Lines, more power to you! Having an open credit line doesn’t impede you from using the Nexo Booster in any way. There are only two main differences between the above example and boosting assets with pre-existing credit:
First, your loan-to-value ratio will differ. If, in the example above, the LTV would be about 51%, here it would be recalculated with the existing LTV of your outstanding credit. Whether the ratio will be higher or lower depends entirely on how big your outstanding credit is and its existing LTV. Secondly, you will accrue interest on the total sum borrowed for your booster-acquired assets and your pre-existing crypto credit.
Something Cool аbout the Nexo Booster 😉
Every asset you can use as collateral for our Instant Crypto Credit Lines has a permitted LTV. For Bitcoin, for example, it can be as high as 50%, but for other assets, it’s lower. The Nexo Booster has one permitted LTV (70%) for all the cryptocurrencies. This way, you can borrow more against currencies that otherwise have a lower available LTV.
Have an open booster position and your crypto’s price goes up.
Well, first of all, if this happens, congratulations. Depending on how much the value of the collateral from your Boost has gone up, you may be thinking about taking profits from your boost and closing your position. In this case, all you have to do is repay your outstanding credit – you can do this with assets from your savings wallet or by ordering Nexo to repay the crypto credit with part of your collateral. With your assets having appreciated in value, this should only be a small portion of your booster-acquired crypto. The rest is your profit.
Have an open booster position and your crypto’s price goes down.
As with any leveraged long position, if the value of your coins drops, you’re exposed to bigger losses. What essentially happens is you still owe Nexo the same amount you borrowed, but the underlying assets you spent those funds on are losing value. In this instance, you may lose the entirety of your initial investment. This differs from Nexo’s Instant Crypto Credit Lines in that even if all your collateral is liquidated, you still have the borrowed funds or any assets you may have purchased with them. In contrast, boosted assets remain in your Credit Line and, in extreme cases, may be completely liquidated.
All this may sound concerning, but it’s the way the market and leverage works. We ask all our clients to be responsible and not engage in leverage transactions with funds they can’t afford to lose.
Why Boost? Use Cases for the Nexo Booster
Boost to Catch the Bulls
We all know the feeling, the market has taken off, and we can just feel in our bones that it’s going to keep climbing, but don’t have the starting capital to make as big an investment as we’d like. That’s where the Nexo Booster has your back. Through it, Nexo can provide you with up to 3x the funds you start with, so you can catch up to the herd of bulls and make your investment count.
Buy Boost the Dip
Dips are favorite buying moments for most of us. Still, using the funds you already have or simply borrowing against 20-50% of the value of your crypto isn’t always enough, especially when the market appears to have hit rock bottom. If you’re looking to bump up your gains from buying the dip, the Nexo Booster is an efficient way to do so.
Boost to Save Time on Leverage
Speaking of efficiency, purchasing crypto through leverage is nothing new. Many Nexo clients have been using out Instant Crypto Credit Lines over the years to leverage their holdings by taking our credit and then purchasing crypto on an exchange, and lately on Nexo Exchange. Our team knows that making multiple transactions and moving crypto back and forth between wallets and exchanges takes time, so we built a bridge between our credit lines and exchanges. Thus the Nexo Booster saves you time by automatically executing a borrow and exchange transaction all in one go.
Boost to Ensure Prices When Buying via Leveraging
The integrated execution of borrow and exchange transactions that comprises the Nexo Booster doesn’t just save you time; it can also save you money. Imagine you’re getting a loan and preparing to reinvest it in a coin. Now, we all know crypto can be wild! and by the time you get your credit and move the funds to the relevant exchange, the price of the asset you’re trying to acquire might have risen. With the Nexo Booster, the process of borrowing and buying your goal asset happens instantly, completely eliminating price fluctuations along the way.
Do I have to pay taxes when using the Nexo Booster? Does the transaction count as selling?
The Nexo Booster uses our Instant Crypto Credit Lines. It is simply a way of taking out a larger amount in credit which is not a taxable event and does not count as selling. However, the Booster, unlike the regular Nexo credit line, contains one or two exchange transactions, depending on what kind of boost you’re doing: a single asset boost or a boost with two assets. And while taking out a loan does not trigger taxes in most jurisdictions, in some countries, like the US, even swaps between crypto assets incur taxes.
In light of this, you must be aware of the mechanism behind the Nexo Booster. It helps to think of the Nexo Booster as a combined flow of the Nexo Exchange and the Instant Crypto Credit Lines with the added aspect of leverage. You put forth an initial investment in assets you already hold and Nexo issues you leverage in the form of credit in USDT, which is then automatically converted into the asset you’ve chosen as your “Receive currency”. All this happens in the background, so you won’t see these transactions. Still, it’s important to know about them for tax purposes since, as we mentioned earlier, in some jurisdictions, exchange transactions incur taxes.
If you’re doing a boost with a single asset your boost will only have one exchange transaction – the one from the USDT credit to the asset you want to receive. The initial sum you put forth matches the “Receive currency” in this case and is therefore moved directly to your Credit Line Wallet without being converted. In this situation, you must track whether the single exchange transaction from your USDT credit triggers taxes. Depending on your country, it’s entirely possible you may not owe any taxes, but it is your responsibility to confirm this.
However, if you’re doing a boost between two different assets – in other words, if the currency you’re initially putting forth is different from your “Receive currency” – you may have to pay taxes if you are from the US and perhaps in some other jurisdictions too. What triggers taxes here is the exchange of the coin you used to initiate the booster transaction into the currency you’re receiving. This tax applies only to the individual swap we make on your behalf of the assets you already hold, not to the entire booster transaction.
As in the above example for single asset boosts, you will also have to check whether the swap from the USDT credit issued for your leverage triggers taxes in addition to the exchange transaction from your “Pay with currency” to your “Receive currency”. Essentially, with a double asset boost, there are two exchange transactions to be aware of for tax purposes.
Since tax information is specific to each jurisdiction, we strongly urge you to do your own research regarding taxes.
How are my risk factor and LTV adjusted or additional credit calculated depending on the leverage I choose with the booster tool?
If you already have an open credit line, the LTV from your booster transaction and your existing LTV will be recalculated into a single LTV marker.
Do I accrue borrow interest rates for the Nexo Booster?
Yes, you do. Since assets from the Nexo Booster are collateralized in a Nexo credit line, the outstanding amount accrues interest just like any other credit on our platform. Your APR depends on your Loyalty tier and can be as low as 0% if you’re in Platinum users. You also get charged a one-off Booster fee that can range from 1-3% and depends on the specifics of your transaction.
Note that if you have a pre-existing credit line, you will accrue interest on the total amount of your previous credit and booster credit together.
What is leveraged trading/margin trading and what aspects of it apply to the Nexo Booster?
Leverage trading or trading on margin is the act of using borrowed funds to purchase assets and grow one’s investment portfolio. Usually, this happens by borrowing against an initial sum of money or assets through a broker and using this down payment as collateral to get financing. The Nexo Booster is essentially an easy-to-use tool for leverage trading and the standard principles of leverage apply to our booster transactions.
While the Nexo Booster could be deemed similar to leverage or margin trading, there are two differences between our product and margin trading:
- The Booster allows less risk for our clients by only permitting safer loan-to-value levels for transactions than is perhaps typical with leverage trading. We only allow up to 3x leverage.
- The Booster only offers leverage suitable for long positions, while margin trading can typically also be used for short positions. We are looking for ways to perhaps provide the necessary infrastructure for short positions – those that assume an assets price will go down. However, this development would potentially arrive further in the future.
How is using the Nexo Booster different from taking out credit in USDT and buying more crypto with it?
The main difference is in the number of manual actions you’ll have to make, the execution time, and, most importantly, the leverage ratio.
Technically, if you wanted to, you could leverage yourself up to 2x by repeatedly borrowing against crypto with Nexo’s Instant Crypto Credit Lines, purchasing more crypto with the borrowed funds, collateralizing those assets, and then using the credit against them to buy more coins, repeating the process numerous times.
What the Nexo Booster does is automate what would otherwise be countless manual credit requests and swaps from stablecoins to crypto into one instant transaction, allowing you to leverage up to 3x rather than just 2x. This saves you time and also guarantees less price fluctuation for acquiring assets through leverage.
How can I sell the assets I acquired through a boost? How do I get out of the boosted position and/or collect profits from the assets I’ve boosted?
To sell the crypto you received through a booster transaction, you will first have to repay your outstanding credit. You can do this by tapping the “Repay” button on your Dashboard. If you didn’t have an open credit line before you used the Nexo Booster, you would have to repay all your credit to make all the assets from your boost available for selling.
If you had outstanding credit before using the Booster, you only have to repay the amount used for your boost, plus any accrued interest to free up those assets. Of course, our Instant Crypto Credit Lines are super flexible, so you can pay off parts of your credit and unlock your booster assets in parts as is most convenient for you.
Where can I view the status of my boosted position?
Your boosted position goes straight to your Credit Line Wallet. To track its status, all you have to do is select the asset you acquired through a boost from the “Wallet” section of the Nexo App and then tap “Credit Line Wallet” on the top right of your screen.
How can I trade/swap an asset I’ve boosted?
Since the assets you boost or gain through the Nexo Booster are automatically collateralized, the only way to swap them is through our Collateral Exchange. Keep in mind that this feature doesn’t provide our full exchange functionalities, but it does allow you to swap your collateralized assets for others with a higher loan-to-value ratio. This gives you extra flexibility and protection against volatility when engaging in Booster transactions.
How do I set a stop loss for the assets I’ve boosted?
At present, the Nexo Exchange does not have a stop lost functionality. However, our team recognized the need for this vital tool, particularly in the crypto space and is hard at work to bring it to you as soon as possible.
Want to dive even deeper? Make sure to visit our dedicated Nexo Booster product page!