After the Terra (Luna) crash, an already shaken cryptocurrency market sees another major industry player falling apart: Celsius.
Celsius is a crypto lender and a big player in the world of decentralized finance (DeFi). Celsius announced in a brief blog post on Sunday evening that it was suspending withdrawals, trades and transfers for its customers.
The move threw the crypto market into a state of panic as billions of dollars across the globe were now frozen. Crypto Twitter started fueling the fire that Celsius might be insolvent. Prominent crypto YouTuber Ben Armstrong is among the millions of users affected by this decision and caught on Twitter to express their concerns.
Why Celsius Token Down?
The dramatic fall of the Celsius token was exacerbated by several things happening almost simultaneously in the traditional and DeFi markets.
Inflation data from the United States last week showed the biggest increase in inflation since 1981. The consumer price index (CPI) hit a year-over-year high 8.6%. This spike instilled fear in the market as a whole and caused many investors to continue to de-risk stocks and crypto and turn to cash and government bonds.
Coupled with worse than expected inflation figures, cryptocurrency investors have already been rattled by the recent collapse of UST and Terra (Luna) in May.
The world’s largest stablecoin, USDT, has also recently seen increased volatility against the US dollar. Investors worried about another UST-like meltdown have been selling USDT over the past month.
On top of the large amounts of fear in the market caused by inflation, the experience with Luna, and the crypto meltdown in general, on June 13, 2022, Bitcoin crashed 14% after the crypto lender -Celsius currency has frozen withdrawals and transfers, citing extreme conditions.
The freezing of customer withdrawals and transfers does not appear to be transparent, and Twitter users have criticized Celsius’s team for its decision and the company’s lack of disclosure of assets versus liabilities.
To dive a little deeper, Sunday night’s announcement to their community states that Tether has taken this step to “stabilize liquidity and operations while we take steps to preserve and protect assets.”
“We are taking this step today to put Celsius in a better position to meet, over time, its withdrawal obligations,” the company said.
Celsius says it freezes those stocks on its platform to protect assets, but still allows its users to take out loans.
What many don’t realize is that since Celsius and other crypto lending platforms are in a regulatory gray zone, Celsius and other similar companies are not required to disclose their assets to the public.
The U.S. Securities and Exchange Commission (SEC) has been slow to issue regulations, which has caused problems for retail investors.
Celsius Network Price Movements (CEL)
The Celsius token, which is used to earn interest on tokens deposited on the platform, has fallen around 97% in the past 12 months, from $7 to around 20 cents.
The token is down almost 40% as of June 15, 2022 and could head further south if Celsius announces insolvency. The cryptocurrency market is suffering as Bitcoin fell below $25,000 on Tuesday after a heavy sell-off.
The move to freeze client accounts sparked an even bigger sell-off in cryptocurrencies, with the total crypto market capitalization dropping below $1 trillion on Monday for the first time since January 2021.
Will Nexo acquire Celsius?
Celsius Network’s rival crypto lending firm, Nexo, contacted its counterpart after the news broke to offer to buy whatever assets Celsius had left and acquire their receivables.
Nexo says in its Twitter statement that its business is in a strong cash and equity position to acquire the remaining assets held by Celsius.
Nexo’s Letter of Intent to Celsius states that “Nexo Partners and Affiliates could readily acquire from Celsius some or all of the eligible outstanding secured loan receivables secured by their corresponding cryptocurrency collateral, subject to Nexo’s risk management and collateral requirements”.
Nexo claims to have completely de-risked its DeFi exposure at this stage and has adequate liquidity to easily make this acquisition possible.
Where to buy Celsius (CEL)
Although the Celsius Network token has an uncertain future, Celsius can be purchased on some of the world’s largest exchanges like FTX and Huobi Global.
Getting on board one of these exchanges isn’t difficult and requires some basic know-your-customer processes like submitting a photo of your driver’s license.
If you want to buy Celsius somewhere other than a centralized exchange, you can also find it on Uniswap.
Celsius Network is a platform that allows you to buy, borrow and pay in over 30 cryptocurrencies.
From the user’s perspective, it acts like something between a savings account and an investment wallet. Users can also receive under-collateralized loans on their crypto assets through a level of centralization.
The risk that usually accompanies crypto trading is lower, however, thanks to Celsius’ unique business model. All deposits are insured up to $100 million and there are no withdrawal limits, fees or lock-up periods so you can withdraw when you need it, whenever you need it.
Overall, Celsius Network offers a less risky and less complicated way for beginners and HODLers buy and hold cryptos while earning regular returns on their investments.
- Passive income
- Crypto investors
- Rewards of up to 15% APY paid weekly
- Easy to use mobile platform
- Available in over 100 countries
- Instant and free payments with CelPay
- Great loyalty program
- Minimum educational resources
- Limited Cryptocurrencies
Cryptocurrency market cycle
Historically, one way to measure the cryptocurrency market is to compare Bitcoin’s price action to the altcoin market. If the altcoin market is in full moon and other tokens are outperforming Bitcoin, then it is altcoin season.
It’s not altcoin season right now, and Bitcoin and the altcoin market are falling together. Despite depreciating over 50%, Bitcoin still outperforms almost all other major tokens at present.
Bitcoin’s historic dominance in the crypto market doesn’t mean its smaller counterparts can’t take the stage for some serious gains. Although an alt season like this has happened in the past, it doesn’t look like the Bitcoin or altcoin market will be ahead for quite some time.
So, is Celsius Token dead?
If you live by the adage “don’t try to catch a falling knife”, it would be unwise to enter a Celsius position at this point.
The crypto market is currently in freefall, and if you try to catch it, you could get cut. Additionally, if Celsius proves insolvent in the coming weeks and fails to honor outstanding loans, it is quite possible by then that the Celsius token is dead.
As of June 15, 2022, Celsius is trading at $0.5523 and is down around 18.68% in the past 24 hours. It is also down 92% from its all-time high of $8.05, which it hit in June last year.