Crypto lending platform Celsius has paused withdrawals as Bitcoin plummets, causing its own token to plummet. Here’s what happened…
What is Celsius and why is it crashing?
The cryptocurrency market is facing another threat like the LUNA/UST that crashed at the beginning of May. The entire altcoin market melted down as Bitcoin dropped from $40,000 to $21,000. The latest red alarm came as Celsius suspended all withdrawals and transfers…
.@CelsiusNetwork is pausing all withdrawals, Swap, and transfers between accounts. Acting in the interest of our community is our top priority. Our operations continue and we will continue to share information with the community. More here: https://t.co/CvjORUICs2
— Celsius (@CelsiusNetwork) June 13, 2022
What’s going on in Celsius (CEL)?
Celsius works similarly to a bank. Customers deposit their crypto in Celsius (Bitcoin, Ethereum etc.). Celsius lends these cryptos to borrowers. Therefore, the client transfers their crypto to Celsius. Like a bank in Celsius, it lends to others in crypto. Celsius reimburses depositors the size of their deposits. Earnings are dynamic and change over time.
As can be seen from the above, this return can be increased if depositors choose to receive their rewards in the platform’s native token CEL. But now everyone who gets paid in CEL regrets it. Currently, Celsius’ market cap is $66 million, down 97% from its ATH level of $1.7 billion.
Celsius suspends withdrawals
Celsius suspends all withdrawals and transfers on June 13 . In particular, a business like Celsius needs liquidity to operate. If customers no longer feel comfortable making deposits, there is no business. Just like a bank. So an announcement that customers are losing access to their funds, like on June 13, is one of the worst things that can happen as it destroys confidence going forward. For this simple reason, two things are clear and need not be overcomplicated:
- Celsius’ decision to suspend withdrawals represents a last-ditch effort to save business.
- Confidence in the long-term model is no more, and this in itself is a killing blow.
On the other hand, it’s important to remember how Celsius once assured its investors:
If you don’t have free and unlimited access to your own funds, are they really yours? Get yourself out of the bank and join the next generation of financial services with Celsius. No fees, no penalties, no deadlocks, profit only
🚩If you don't have free and unlimited access to your own funds, are they really *your* funds?#UnbankYourself with Celsius and join the next generation of financial services – no fees, no penalties, no lockups, just profit 🤑https://t.co/Qsrcu9hmhu
— Celsius (@CelsiusNetwork) November 14, 2019
What happened?
Celsius Network announced that it is suspending transactions:
Due to extreme market conditions, we are announcing today that Celsius has paused all withdrawals, clearing and transfers between accounts. Today, we are taking this action to put Celsius in a better position to meet its withdrawal obligations over time. As
Kriptokoin.com we have covered all the details of the Terra crash in this article. The first red alert for Celsius started with the following rumors claiming to have purchased Terra. Celsius allegedly bought LUNA and was involved.
https://twitter.com/lawmaster/status/15240984095940407185
That was a red flag in itself, but possible doom on Twitter There were also rumors about its effects. Conspiracies circulate in crypto every day, and most of them are not worth paying attention to. But the result here is the obvious CEL collapse, caused by the Terra crisis. The risk of any yielding product following Terra is greatly increased.
Statistics
After closing its Series B boost last November, Celsius was valued at $3.5 billion, while the CEO said it had $28.6 billion in assets under management (AUM).
https://twitter.com/MikeBurgersburg/status/1521598805392740355
This report, which was published five weeks before The Logic, later It showed that AUM had dropped to $12 billion. They were also shown to be involved in the UST crisis. Looking at Blockchain, it appears to have withdrawn funds from the Anchor protocol during the UST debacle.
Additionally, blockchain analytics firm Nansen claimed that Celsius may also have “significant ETH liabilities.” Meanwhile, Celsius transferred over $320 million in crypto to the FTX exchange before announcing the suspension of withdrawals in a desperate bid to bolster liquidity.
Is the end of Celsius?
On this subject, the crypto expert who has been following closely says:
Even if they escaped bankruptcy in the short term, I can’t imagine how they regained confidence in their business model from here. Now they are where their Do Kwon and Terra dudes are, hanging around desperately with Bitcoin sell orders to support the stabilization. I think they could merge with the now renamed Luna Classic and create some kind of new airdrop.
