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Celsius in crisis Is the lending service about to overheat?

 


Celsius has massive liquidity problems. In response, the company announced in a blog post that it was “[to] pause all withdrawals, swaps and transfers between accounts”. Now new details have become known.

Celsius wants to prevent withdrawals to private wallets. However, users continue to earn returns, so-called rewards, on their crypto deposits. The network keeps touting high interest rates of up to 17 percent annually on crypto deposits.


However, it is questionable whether these commitments can be guaranteed at all in view of the massive wave of payments that Celsius has received in the past few days. There are also unconfirmed reports of large-scale liquidation by the company. As Watcher.Guru writes on Twitter , Celsius previously moved $320 million worth of crypto assets to FTX .


It remains questionable whether the company has sold assets and thus once again withdrawn liquidity from the platform. A corresponding request from BTC-ECHO remained unanswered at the time of going to press. If the allegations are true, however, this would be a clear alarm signal.


CEL collapses

The Celsius Network Token (CEL), the in-house governance token, also fell into the abyss in the wake of the news. At press time, CEL is down 50 percent -- 97 percent below its all-time high of $8.01.

Nexo: Competitor submits purchase offer

In the ranks of the competition, however, people are already rubbing their hands. Nexo , a direct competitor, made Celsius an offer to buy "certain assets, primarily secured loans and [...] customer data". According to the content of a corresponding "Letter of Intend", a declaration of intent that Nexo shared on Twitter , despite the current market situation, there were no liquidity problems.

Celsius is a so-called lending provider. Users can deposit cryptocurrencies there and earn a kind of interest, called a reward. Of course, lending services can only pay out these rewards if they generate sufficient liquidity – for example through interest income from loans that the company in turn grants. Lending services work in a similar way to banks, just without state security mechanisms such as deposit protection or central banks that help out with liquidity if necessary.

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