Celsius Network Ltd, a platform that specializes in cryptocurrency lending, has suspended funds withdrawals, trading and transfers. The announcement referred to “extreme market conditions” and raised investor concerns about the company’s possible bankruptcy.
The platform is one of the biggest players in the booming cryptocurrency lending space. As of May, the company had more than $8 billion in loan to clients and managed nearly $12 billion in assets, which were paying annual interest rates as high as 18%. Basically, a percentage can be described as the crypto equivalent of a bank – albeit without the stringent insurance requirements that traditional lenders are subject to.
Market disruptions become fatal
A recent report by blockchain analytics firm Nansen IndicatesCelsius Network and a handful of other institutional investors invested hundreds of millions of sums in the Terra Algorithmic stablecoin “UST” and withdrew them during the crash. How much the platform was actually deposited into the Anchor provisioning protocol is unknown. But without adequate hedging and risk management, it could have resulted in huge losses for Percentage.
Added to this is the Lido Finance liquid staking protocol chapter. In essence, the project tokenizes tokens that are deposited into the protocol’s staking contract. For example, Lido Staked Ether (stETH) represents ether injected 1:1 into an Ethereum Staking contract. This allows users to receive staking returns on a liquid token that can be used in DeFi applications. However, stETH Because of various concerns He lost his connection to the “real” ether in early May. with hundreds of millions of dollars in stETHwhich was supposed to pay customers a 6 percent return on ether, caused liquidity problems for Percentage.
Withdrawals and transfers remain frozen
Celsius Resigned Checkout stops in a note to their customers. No specific reason was disclosed, the action simply aims to put the company in a better position to meet its drawing obligations.
“Celsius has valuable assets and we are working diligently to honor our commitments. We are taking these necessary actions for the benefit of our entire community to stabilize liquidity and operations while taking steps to preserve and protect assets.” – A note to the Celsius community
With services like Celsius often marketed as alternative savings accounts, regulators have been arguing for some time that high-yield crypto accounts are unregistered securities. This would justify increased investor disclosure and oversight. State regulators have already taken legal action against Celsius Network, while the US Securities and Exchange Commission has fined BlockFi $100 million.
Nexo is making an acquisition
Celsius’ possible imminent bankruptcy prompted a competitor to announce a possible asset bid. Nexo, a Swiss competitor from Zug, Show interest in the entire loan portfolio and submit a formal letter of intent to the defaulting company. According to the announcement, Nexo intends to purchase all remaining and eligible assets, but primarily its secured loan portfolio.
Nexo has a strong liquidity position and good ownership to easily acquire any remaining percentage grade eligible assets, in particular its secured loan portfolio. We are compiling an offer for Celsius pursuant to that agreement and will transmit it publicly. 5/
– Nexo (@nexo) June 13, 2022
The offer is given without specifying a specific price and is valid for one week. During this time, Celsius must either decline or accept the offer. Nexo reserves the right to withdraw by then. So far, Celsius has not commented publicly, but rumor has it that the offer has already been rejected.
Are Celsius customers facing bailouts?
“You will have no remedy or right with respect to any of Celsius’s obligations to you other than your rights as a creditor of Celsius under applicable law.” – Platform Terms of Service
Depositing into said accounts transfers all rights and ownership to the digital assets, including equity. However, the extent of the company’s liquidity problems remains unclear and no hasty conclusions should be drawn. Hopefully, even when Celsius resumes operations, it will encourage all users to return to the original benefits of decentralized blockchain systems.