Murray will make a little over $4.4 million in 2019-20 and would have been a restricted free agent next summer.
Denver's logic behind extending Murray is clear to see.
The Nuggets aren't a marquee free-agent destination, so they have to rely heavily on their homegrown stars. Denver is fresh off a 54-win season and a return to the playoffs as well, so Murray's contract continues the momentum the team built this past year.
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Looking ahead, both Murray and Nikola Jokic will be under contract through at least 2022, which allows the Nuggets to build around their franchise cornerstones.
The timing of this move is somewhat puzzling, though.
Murray has obvious potential but hasn't reached a true star level. He averaged 18.2 points and 4.8 assists but shot just 36.7 percent from beyond the arc and turned the ball over 2.1 times per game. The 22-year-old ranked 25th in ESPN's real plus-minus (plus-1.18) among point guards.
Murray's biggest issues came on the defensive end. Denver had a 108.0 defensive rating with him on the floor and a 104.4 defensive rating when he was on the bench, per NBA.com. Opponents shot 41.4 percent on three-pointers when matched against him as well.
The biggest question mark is why the Nuggets maxed out Murray now rather than waiting until they saw him for another season, when they still could have matched any offer he received from another team.
Denver didn't get any financial concessions by taking a proactive approach and getting this deal ironed out so early.
The best-case scenario is Murray plays well and proves to be well worth a max extension. The worst-case scenario is somewhat similar to what the Minnesota Timberwolves are dealing with after signing Andrew Wiggins to the max.
The Timberwolves re-signed Wiggins before he hit restricted free agency in the hope he'd play up to his five-year, $147 million contract. Instead, his development has stagnated, leaving Minnesota with one of the most cumbersome commitments in the league.
Things shouldn't get that bleak for Denver because Murray is a better all-around player than Wiggins, but Wiggins illustrates the danger of paying for potential.