Is Celsius Network Declining Like Terra?

  • Celsius NetworkThe native token plunged 40% in just one night after the project locked $12 billion in crypto assets.
  • Due to ‘extreme’ market conditions, Celsius Network announced that it is suspending all withdrawals, clearing and transfers between accounts.
  • Experts state that Celsius Network is constantly withdrawing from DeFi positions to stake stablecoins and survive the liquidity crisis.

Celsius Network, which is hugely popular among crypto lending platforms, is experiencing a liquidity crisis as crypto markets drop. The project removed $247 million worth of Wrapped Bitcoin from AAVE and posted it on the FTX exchange. Consistent withdrawal from DeFi positions and resumption of protocols triggered distress signals.

Celsius Network Suspends All Operations

Celsius Network announced on June 13, 2022 that all withdrawals, swaps and transfers between accounts are paused. Celsius cited this action as a step towards putting the project in a better position to meet its withdrawal obligations.

Announcing that users will also win awards during this pause, the executives stated that this stop processing is done to stabilize liquidity and protect assets.

Commenting on all the events, experts pointed out that the project is currently experiencing a serious liquidity problem.

Celsius Pays Users 30% Weekly Interest

Users included in the Celsius network ‘stake’ their assets in the relevant network and these staked assets are used by the network for funding, meeting loans, lending, etc. The project, on the other hand, undertakes to pay up to 30% weekly interest to its staking users, but after this latest crisis, potential revenues have both decreased and the risk of network collapse has emerged.

After this crisis, the Celsius network collapsed in May. terra ecosystem may experience a major collapse. After the project announced that it was suspending all operations, the native token plunged a staggering 40%. In addition, two unexplained moves of the project drew attention:

  • Celsius exited DeFi positions (WBTC deposited in AAVE) and was replaced by stablecoins like USDC.
  • Celsius Network sent $320 million in Ethereum to the FTX exchange.

Experts claim that Celsius Network is working hard to deal with the current liquidity crisis facing the project. According to some claims, if Celsius fails, the project could sell a significant amount of staked ETH (stETH provided by the Lido DeFi lending platform), causing the token to move further away from ETH.

On June 4, 2022, Celsius Network has $3.8 billion in assets across multiple DeFi protocols and wallets and AAVEhad $1.18 billion in debt from Compound and Maker. The project emptied predetermined DeFi positions to fund major DeFi wallets.

The balance of Celsius Network’s main DeFi wallet increased from $ 5.6 billion in Ethereum, WBTC and other tokens to $ 10,514 with massive withdrawals of WBTC from AAVE, and $247 million was transferred to the FTX exchange.

Crypto advocate @MikeBurgersBurg researched withdrawals and shared his views on the subject in a tweet he shared.

@yieldchad, a crypto analyst, shared the following views on the subject:

“Celsius has lost customers’ money and needs to devalue all deposits or they will be liable for a bank run.”

The debate over whether Celsius is technically bankrupt has been raging since the first week of June 2022.

While withdrawals from leading DeFi wallets can be compared to a bank operation, Celsius has yet to explain the move and purpose of replacing WBTC and ETH withdrawn from AAVE for stablecoins like USDC.

You can follow the current price action here.

Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, Koinfinans and the author of this content cannot be held responsible for personal investment decisions.


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