As the crypto market experiences an extended bearish run, dropping nearly 30% in 24 hours, the spotlight has moved squarely to decentralized finance (DeFi) and its chaotic reaction to the current market distress. With the Terra stablecoin implosion not far back in the rearview mirror, American-Israeli crypto lending firm Celsius has emerged as the latest casualty of the market downturn.
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The News
Amid tumbling crypto valuations, Celsius posted an official memo on its website for its community, explaining, “due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, Swap, and transfers between accounts. We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations.”
The decision wasn’t received well by Celsius’ users, nor the broader crypto community. Instead, the move stoked fear and panic, leading to further sell-offs, with some experts claiming that the company is facing a liquidity crisis and can’t meet its obligations. Feeding the online commentary frenzy, Celsius hasn’t provided any specific timeline regarding when the withdrawal pause will be lifted.
Even with the company’s reassurances, allegations of misconduct have surfaced around social media platforms, negatively impacting the value of Celsius’s native $CEL token. Shortly after the withdrawal pause news broke, the $CEL token lost nearly 70% of its value.
The Saga Continues
Meanwhile, crypto exchange Nexo has offered Celsius a buyout plan that covers specific assets, primarily Celsius’ collateralized loan portfolio. Nexo took to Twitter, pointing out “what appears to be the insolvency” of Celsius. The Nexo team further stressed that this offer would only remain in effect until 4:30 am UTC, June 20, 2022.
Founded in 2017, Celsius offers customers high yields for crypto deposits, which it lends to other crypto firms – quite similar to the business models of Nexo and BlockFi, among others. Celsius received cease-and-desist letters from four states (Kentucky, Alabama, New Jersey, and Texas) in 2021, as regulators from these states have made it clear that they consider high-yield crypto lending services unregistered securities.
Despite regulator scrutiny and community outrage, no verifiable proof has arisen that Celsius is facing a liquidity crisis. Nevertheless, Celsius’ token $CEL has lost almost 98% compared to its all-time high as investors question its latest moves.
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