On Monday, June 13, 2022, the crypto economy dropped below the $1 trillion region, as a great majority of crypto assets have lost between 10% to 25% during the last 24 hours. Meanwhile, the crypto community has been discussing the cryptocurrency lending application Celsius as rumors of insolvency have been swirling. On June 12, around 10:10 p.m. (ET) Celsius announced that it paused “all withdrawals, swaps, and transfers between accounts.”
On Sunday evening, the lending firm Celsius published a tweet that detailed specific operations on the platform that were paused. “Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, swaps, and transfers between accounts,” Celsius revealed.
“We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations,” Celsius added. The firm also published a blog post that explained Celsius was making moves to fix the situation.
“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,” the Celsius blog post notes. “Furthermore, customers will continue to accrue rewards during the pause in line with our commitment to our customers.”
There are rumors that Celsius may be insolvent and speculation concerning the company’s money issues started well before the company paused operations. The Former CEO of The Block Crypto news publication, Mike Dudas, tweeted about the “demise of Celsius” the day before the firm stopped withdrawals.
“I’m saddened by how many people are cheering on the demise of [Celsius Network],” Dudas tweeted. “I, along with many others, counseled people not to put their funds with that risky business. However, many did, and a large number of retail folks look like they are soon to be rekt. We all lose.”
However, the founder and CEO of Celsius, Alex Mashinsky, seemed to be offended by Dudas’s tweet and responded. “Mike do you know even one person who has a problem withdrawing from Celsius?” Mashinsky asked. “Why spread FUD and misinformation? If you are paid for this then let everyone know you are picking sides otherwise our job is to fight Tradfi together…”
Furthermore, there’s speculation that roughly $500 million of Celsius’ funds are locked into the Maker protocol for leverage. “Celsius Network has 17,919 WBTC leveraged in Maker protocol,” an individual on Twitter wrote. “This position faces liquidation at $22,584/$BTC. $278 mil DAI debt, making it the largest individual debt position on the protocol.”
Blockstream’s Adam Back responded to the tweet and said: “I’m assuming this is a defi BTC yield strategy. Can’t [Celsius Network] pull the DAI out of whatever yield/staking it’s in, then unwrap the DAI and get the WBTC out? Hope there’s no term-lockup on the DAI staking,” Back added.
The Block Crypto’s vice president of research, Larry Cermak, tallied up a database of Celsius wallets and came to the conclusion that there’s $1.5 billion resting in these accounts. “Please keep in mind that there could be mistakes. The list might not be complete and I could have possibly mislabeled some over the years of tracking them,” Cermak added.
Another individual tallied up Cermak’s list and came up with roughly $1.3 billion residing on Celsius wallets. In addition to all the rumors and speculation, a Celsius competitor has offered to purchase the company’s assets. Nexo AG has submitted an open letter to the Celsius Network with a formal offer.
“After what appears to be the insolvency of [Celsius Network] and mindful of the repercussions for their retail investors [and] the crypto community, Nexo has extended a formal offer to acquire qualifying assets of [Celsius Network] after their withdrawal freeze,” Nexo explained with the letter attached to the tweet.
“[We’ve been] operating a sustainable business for 4+ years, based on solid fundamentals and prudent risk management, Nexo is in a strong liquidity and equity position as evidenced by the only real-time reserves attestation of a blockchain finance company,” the firm added.
The company concluded that obtaining all or part of Celsius’ assets “will go a long way in providing immediate liquidity to [Celsius Network].” Nexo said it is still waiting to hear back from Celsius Network’s management team concerning the formal offer.
What do you think about the situation surrounding Celsius Network? Let us know what you think about this subject in the comments section below.