What happened With Celsius (CEL), and How its Crypto Lending Burned Out

  • Crypto lending firm Celsius opened a bundle of loans.
  • The firm bought more than $500M worth of stETH but its value dropped due to extreme market conditions.
  • The situation has caused the firm to halt withdrawals.

Earlier this week, the crypto market was in turmoil after Celsius’ amassed $20 billion in assets at its peak had been dissolved, which led into a solvency crisis.

Technically, Celsius is a do-it-all app that provides its customers seamless and trusted access to crypto services. The company is a custodial asset manager that allows users to access regulated loans and yield, for a transaction fee.

Celsius is one of the largest centralized gateways to cryptocurrency. Its firm has raised $864 million of venture capital and housed over $3 billion funds of more than 1 million users. Yet, the firm appears to be insolvent as of today and it’s dragging the whole crypto market with it.

The problem began after Celsius made a big investment in staking stETH token, which was locked for 6-12 months until after the beacon chain merges. However, the recent crypto bear market has led stETH to drop and the merge hasn’t occurred yet. As a result, the token became more illiquid.

The situation has made it harder for Celsius to put up the money for its users that would like to withdraw their funds. That’s why the company decided on Monday to halt the withdrawal from its app due to “extreme market conditions.”

Meanwhile, Celsius removed ‘banking is broken’, ‘unbank yourself’, ‘replace wall street with blockchain’, among others from their whitepaper and website and its utility token CEL also dropped.

The crisis at Celsius may give rise to more regulations to make the products safer, and would mean a higher cost for the crypto firms.

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Bryan is a gamer who became genuinely interested in crypto after his initial exposure to Play-to-Earn games like Axie Infinity and Pegaxy. He has basic knowledge of technical analysis and is keeping an eye out for interesting developments in the metaverse and GameFi space.