Terra in May, Celsius in June? Why the heat is on after withdrawals halt, $200M to FTX

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There’s no easy way to say this, but cur­rent cryp­to-mar­ket con­di­tions can only be described as ‘extreme.’ In fact, ongo­ing cor­rec­tions saw the price of Ether and oth­er cryp­tocur­ren­cies tum­ble, with many see­ing sig­nif­i­cant liq­ui­da­tions with­in the market.

Impli­ca­tions of a fur­ther fall could see near­ly $500 mil­lion of on-chain col­lat­er­al fac­ing liq­ui­da­tion. The stETH/ETH pool asset ratio has already been par­ty to an unbal­anced con­di­tion… Now, what is next?

Pausing YOUR flow

Pop­u­lar cryp­to-lend­ing and stak­ing plat­form Cel­sius is indeed fac­ing the heat of the harsh con­di­tions. Accord­ing to its lat­est announce­ment, the plat­form has paused all with­drawals, swaps, and trans­fers between accounts on its plat­form due to “extreme mar­ket conditions.”

“Due to extreme mar­ket con­di­tions, today we are announc­ing that Cel­sius is paus­ing all with­drawals, swaps, and trans­fers between accounts. We are tak­ing this action today to put Cel­sius in a bet­ter posi­tion to hon­or, over time, its with­draw­al obligations.”

That being said, cus­tomers WILL “con­tin­ue to accrue rewards dur­ing the pause.”

Even so, there are legit­i­mate con­cerns to be had. For instance, the firm report­ed­ly had about $12 bil­lion in cus­tomer assets as of May across 1.7 mil­lion users. If things go south, any­thing could happen.

Unstaking the staked, for?

Even though the plat­form has halt­ed with­drawals to sta­bi­lize liq­uid­i­ty and oper­a­tions, claims on social media sug­gest the net­work might be fac­ing a liq­uid­i­ty crisis.

Cel­sius was pre­vi­ous­ly rumoured to be a sell­er of stETH to restore liq­uid­i­ty to user with­drawals, some­thing that may trig­ger liq­ui­da­tions. Just as the news poured in, Cel­sius report­ed yet anoth­er exo­dus, as high­light­ed by Col­in Wu.

Accord­ing to the same, the plat­form unstaked near­ly $250 mil­lion worth of Wrapped Bit­coin from Aave and sent it to the FTX exchange. In addi­tion to WBTC, it appears that a lot of ETH worth mil­lions saw an exo­dus to FTX as well.

How­ev­er, all of those tokens have been sent to the FTX exchange for an unknown rea­son. Nev­er­the­less, the Cel­sius team’s plans with unstaked tokens still remain unclear.

Two pos­si­ble moves come into play here, as high­light­ed by a 13 June tweet below –

Nev­er­the­less, one would have to wait and watch until the plat­form explains the said move. Until then, the cryp­to-mar­ket could see more sell-offs i.e. if the Cel­sius Net­work con­tin­ues to sell more and more assets to main­tain its liq­uid­i­ty oblig­a­tions. In fact, some­thing as bad as the Ter­ra fias­co may come into play too.

Anoth­er con­cern con­nect­ed to this case is the platform’s insol­ven­cy in their ETH posi­tions. Only 27% of Celsius’s ETH is liq­uid, the rest is either stETH or 288,000 ETH staked in an ETH 2.0 con­tract. This makes all this ETH inac­ces­si­ble for at least a year. Indeed, not a promis­ing sce­nario here…

Fur­ther­more, CEL, Celsius’s own token, has dropped by more than 90% over the last 24 hours. It was trad­ing at $0.2, at the time of writing.



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