The crypto lending platform Celsius, has its assets and customers funds close to liquidation.
Celsius can be referred to as some sort of crypto bank, as it renders services that includes lending and borrowing cryptocurrencies and offers sumptuous interests rates. Those high rates is what drove crypto users to it.
What is Celsius?
Celsius is simply a crypto lending platform where crypto users deposit cryptocurrencies they do not want or wish to sell and then borrow against it as collateral. So say you have $5,000 worth of Bitcoin and do not want to sell off but need money to do or spend on something. You could deposit your BTC on Celsius and borrow maximum of 50% which is $2,500 in Stablecoins (USDT, USDC, UST).
Celsius brags itself as the bank for the unbanked. With its slogan “unbank yourself”, it boasted roughly $1Billion of cryptocurrency deposited in it by users and customers. According to its website the figures of users are staggering. It’s in the numbers $8.20B in loans processed 2M+ community members $11,822,322,301+ in assets as of 17 MAY 2022.
With this, it is arguably the biggest Defi/Crypto lending platform. So what could have been wrong?
What went wrong?
Celsius was all good and looked healthy from the outside. Until Terra Luna UST depeg and eventual crash happened. Things quickly spiraled downwards and had a ripple effect on the cryptocurrency market. The market has been seeing a massive downturn as prices were crashing all over.
BTC lost over $10,000 and hit a low of $20,200 removing all the gains it made on its way to all time high (ATH) of $64k-ish. BNB, ETH and the rest of the market has been bleeding.
No one was exempted from loses as users who had funds in Celsius attempted to withdraw their funds to maybe sell off. It was at this point that it was found that Celsius lacked enough liquidity to process all the withdrawal without it resulting to a bank run situation. Trouble was already brewing for the lending platform.
But Where did all the Money Go?
Nebo Finance gathered that sometime last year, the company suffered a loss somewhere above $50,000,000 in the BadgerDAO hack.
With the current market downturn Celsius seems to have been overexposed with what they did with users funds, as it was learnt that about 1,170+ BTC is on the verge of liquidation. We however learnt that the company has been topping up with more crypto to service their position and bring down the liquidation price on their position.
On Monday, 13th June it put out a memo saying “Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, swaps, and transfers between accounts,” Celsius revealed.
A lot of users have taken to twitter to complain about not being able to access their funds on the platform. With the news making the rounds another lending platform offered to take over the lending platforms funds should this lead to insolvency or bankruptcy.