Things are getting a bit heated over at Celsius, it appears, as the crypto lending platform announced tonight that it will be pausing all withdrawals, swaps and transfers between accounts on its platform due to “extreme market conditions.” I smell a panic attack coming on, guys, do you? And with my luck, the stampede's gonna come just when I'd think to go a bit long on Vechain after prices fell drastically low over the weekend. Few are gonna escape this winter unscathed, it seems. But let's discuss this latest development.
About Celsius
Founded in 2017 by Alex Mashinsky and S. Daniel Leon, Celsius Network is one of the largest crypto-lending firms in the world. With more than $11 billion worth of assets, it bills itself as a "platform of curated services" that seeks to disrupt the financial industry, introducing financial freedom through crypto by offering high yields for cryptocurrency deposits, loans at low rates with crypto as capital, zero fees and lightning quick transactions.
Things heat up
Temperatures began rising at Celsius recently when the crash in crypto prices erased billions of dollars in market value, leading to a run on funds. Last month, the firm came under intense customer scrutiny as some alleged that it had liquidated some of its assets.
Later, there were allegations that Celsius played a role in the LUNA/UST implosion, and customers began withdrawing funds, with some questioning promotional efforts and suggesting that the next crash to come would be at Celsius.
Well, it seems as though they weren't far off.
As the situation worsened over at Celsius, there were reports today that the firm had moved more than a quarter billion dollars worth of WBTC, ETH, and other crypto assets to FTX exchange, possibly to help deal with its liquidity issues. This speculation was further reinforced when, after its token, CEL, plummeted to just above $0.14, Celsius, in a blog posted on Medium, announced its intention to freeze transactions, blaming extreme market conditions for its decision.
"We are announcing that Celsius is pausing all withdrawals, swap, and transfers between accounts," it stated. "We are taking this action... to put Celsius in a better position to honor, over time, its withdrawal obligations."
The firm explained that this decision is in keeping with its risk management framework, and pointed to a clause in its Terms of Use which it says allows for this process to take place.
"We are taking this necessary action for the benefit of our entire community in order to stabilize liquidity and operations while we take steps to preserve and protect assets. Furthermore, customers will continue to accrue rewards during the pause in line with our commitment to our customers."
Whew! Okay then.
While the Celsius team is explaining that the decision to pause withdrawals and other related activities is its most responsible action, I am not sure that this point of view will be shared by the angry customer trying to move funds out.
And I think at this point it would be a moot point to say, "not your keys, not your...", right?
It might be worthy to note that at the time of this article, the CEL token, after a nosedive earlier in the day, had rallied up 21.6, so I guess it's left to be seen whether the measure taken will make a positive difference. The thing is though, in a landscape that promotes financial freedom and independence and such, I guess there will always be eyebrows raised when an operator in the space behaves like, well, a mainstream bank, freezing access to funds and taking action to "protect" customers without said customers' input.
But tell me, friends, what do you think of this latest development?
