Celsius pauses withdrawals, swaps, and transfers. Find out what this means for you whether you are or not a customer of the crypto savings and lender.
*This is an ongoing story. Check back for updates.
- Celsius Announces Pause
- Is Celsius The Next Terra Luna?
- Nexo Makes Buyout Offer
Celsius Announces Pause
Late last night, Celsius Network alerted its customers via email that “Due to extreme market conditions” it’s pausing withdrawals, swaps, and transfers on its platform. According to the email, the pause appears to be for an undisclosed amount of time.
“We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations.” Celsius is a crypto savings and lender with, according to their current estimates, over 3 billion in Assets Under Management. Celsius offers exceptionally high rewards for customers on their platform by offering loans as well as leveraging customer assets in DeFi.
“We are taking this necessary action for the benefit of our entire community in order to stabilize liquidity and operations while we take steps to preserve and protect assets,” Celsius said, further adding, “We are working with a singular focus: to protect and preserve assets to meet our obligations to customers.
The amount of the assets they currently have isn’t entirely clear. Their website claims to have over 150 BTC worth of total assets (that includes all crypto). However, a fair amount of their assets are illiquid, seeing as they have staked Ethereum and it’s unwithdrawable for a year.
Not to mention, the amount of assets can be severely diminished with some margin calls. In particular, Celsius holds a wBTC position on Maker DAO. Earlier this morning, it’s liquidation price stood at $22,500 USD. The current price of Bitcoin is $23,500. However, Celsius was able to add collateral bringing its liquidation price to $20,272.
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Is Celsius The Next Terra Luna?
Pausing withdrawals is hardly uncommon in crypto. Usually, it comes disguised as a convenient “maintenance” pause. That’s not to say Celsius deserves credit for being honest here. They already had issues with withdrawals this weekend and tried to assuage fears. Everyone would have rolled their eyes at “Closed For Maintenance” sign.
Nevertheless, that didn’t stop Binance from having an issue with Bitcoin withdrawals. They claim to allow users to withdraw using the BNB chain and Ethereum. However, those withdrawals are limited to wallets or other exchanges which accept those networks. This obviously limits the ability to withdraw the world’s biggest asset from Binance.
This is to say, in a long-winded way, that Celsius announcing a pause isn’t enough to indicate that Celsius is done. This is just how crypto works in its centralized form. On the other hand, a “pause” of this nature doesn’t bode well for Celsius’ future.
The obvious comparison here is Terra Luna’s collapse. It was almost a month to the day when Terra began its collapse, so the similarities are striking. Like Terra, Celsius’ founder made brash pronouncements on Twitter to fight FUD. Not to mention, Celsius appears to be more interested in saving its liquidation price, similar to how Terra kept throwing Bitcoin at UST.
However, there are some significant differences. For one, Celsius also owns other assets that could help stave off a collapse like its Bitcoin mining division. Also, unlike Terra, they have assets spread out through DeFi. If they are able to withstand liquidation, customer assets could be returned. That is a big of though.
The biggest problem Celsius will face will be a “run on the bank”. Because, even if they manage to unpause withdrawals, confidence is forever shaken. The majority of their customers will rush to remove their assets from the platform. , Barring a miraculous wick up for Bitcoin, and Ethereum, it’s not looking great for Celsius customers to get their money back.
Nexo Make Buyout Offer
After what appears to be the insolvency of @CelsiusNetwork and mindful of the repercussions for their retail investors & the crypto community, Nexo has extended a formal offer to acquire qualifying assets of @CelsiusNetwork after their withdrawal freeze. https://t.co/JFtKTHRLcY
— Nexo (@Nexo) June 13, 2022
There was a brief glimmer of hope that Nexo might step in to help Celsius customers. The Celsius rival tweeted out an offer to essentially purchase the Alex-Mashinsky-led platform.
However, it appears like the offer wouldn’t help the majority of Celsius’ customers that invested their crypto on the platform. The offer is focused on purchasing the outstanding loans and the assets backing them. Moreover, it says the offer would extend to “brand assets and the customer database of the Seller, free and clear of all encumbrances.” The free and clear part likely means Nexo wouldn’t be encumbered by the debt owed.
Beyond that, the offer doesn’t even specify an amount. It’s safe to say — especially considering the fact that Nexo used Twitter — the announcement isn’t to help overexposed retail customers, but rather to flex. Most of Celsius’ assets are customers using its savings option — the lending part is a far smaller part of their business.
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