Celsius’s decision to stop all crypto withdrawals has sent the already volatile market into a freefall, as BTC, ETH, and other leading cryptos crashed on Monday.
Suspending Withdrawals To Maintain Liquidity
On Monday, leading crypto lending company Celsius, with a $3.25 billion valuation, announced that due to “extreme market conditions,” it was immediately blocking all crypto activity between accounts. This means that over 1.7 million Celsius users will not be able to withdraw, swap, or transfer the crypto funds held in their accounts.
The statement read,
“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. Furthermore, customers will continue to accrue rewards during the pause in line with our commitment to our customers.”
Were The Skeptics Right?
This decision comes as a sudden blow to the community, as Celsius had just published a blog on June 7, talking about how its coffers were sufficiently equipped to handle the market volatility. An excerpt from this blog reads,
“At this already challenging time, it’s unfortunate that vocal actors are spreading misinformation and confusion…Celsius has the reserves (and more than enough ETH) to meet obligations, as dictated by our comprehensive liquidity risk management framework.”
Clearly, till just a few days ago, the Celsius team had held and maintained quite a dismissive stance towards its skeptics, who had previously warned the community about the platform, some even calling it a Ponzi scheme.
Founder and CEO at BrightScope & Digital Assets Data, Mike Alfred, tweeted that,
“The next Terra Luna blow-up is almost certainly Celsius. Celsius may be the most irresponsible company in crypto. Given how much money they lost in Luna, where else do you think they’re hemorrhaging your capital? Mining? Do you really think they have all the Bitcoin they claim?”
Grasping At Straws For Liquidity
The company had already reworked its rewards program in April, preventing most U.S. users from earning rewards due to the pressure from regulators. However, several users are now criticizing it for mismanaging its funds following the collapse of the Anchor Protocol on the Terra blockchain. Reports are claiming that to address the rumored liquidity crisis, Celsius has unstaked $320 million worth of wBTC, ETH, and other crypto-assets and sent them to the FTX exchange. Even though the exact intentions are unclear, speculations are ripe that the Celsius team could sell the assets it sent to FTX. In fact, rival lending platform Nexo has already expressed interest in buying certain assets from Celsius. There is also the possibility that the team tries to stake the tokens sent to the exchange in order to earn yields.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
