Will Celsius become bankrupt? Let’s see what’s happening👇
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Celsius is a crypto lending platform that basically takes your money, promises you a fixed interest rate, and puts it on-chain to use it in DeFi and earn a yield.
In 2020-2021 Celsius did really well, reaching a valuation of $10b and recently raising $400m.
The problem? They kinda manage their funds like degens.
— When
LUNA crashed
, Celsius, who offered strong rates on stablecoins, was exposed to the collapse. They held
significant sums of money in UST (maybe up to $500m)
— For ETH deposits, Celsius promised 6-8% in interest, most likely earned from
staking rewards on the Ethereum Beacon chain. The issue here is that assets held on the Ethereum Beacon chain are locked, you can't simply withdraw them. However, crypto protocol Lido solves this problem by generating a liquid ‘derivative’ called
Lido Staked ETH, or
stETH, which has often traded at 1:1 ratio to ETH. BUT
stETH is not pegged to the value of
ETH. Thus, in bear market, all prices began to slide, and Celsius got kicked in the ass.
❓
What did they do to fight liquidity crisis? They froze withdrawals, transfers and swaps. Now they're trying to increase their reserves to avoid crashing.
💼
Speaking of the reserves. There are about $10b in customer assets in Celsius, and about $1.5b accounted for in Celsius'
various wallets.
Where's the Money, Lebowski?🤣
• About $400m staked on the
Ethereum Beacon chain
• About $400m leveraged in
Maker protocol, which has been on the verge of liquidation (
margin call may haunt Celsius when BTC falls to
< $20 000-$22 500).
And the rest? Nobody knows, people just care about the liabilities. If their assets don't match liabilities outright, they're screwed, and will require:
1) External funding
2) A loan
3) Acquisition, which Nexo, Celsius’ competitor, has already offered. Celsius didn't agree to the offer, but they’ve still got time to think until June 20 🤷
If Celsius’ position gets liquidated, BTC can fall down lower than $20 000. The company will go bankrupt, and their customers will be left with empty pockets.
Terms of use kindly suggest that 😀
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