Crypto lending platform Celsius paused withdrawals on Monday due to extreme volatility in the crypto market.
In a blog-post and mailout to users, the lending platform said it was taking “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.”
.@CelsiusNetwork is pausing all withdrawals, Swap, and transfers between accounts. Acting in the interest of our community is our top priority. Our operations continue and we will continue to share information with the community. More here: https://t.co/CvjORUICs2
— Celsius (@CelsiusNetwork) June 13, 2022
Celsius revealed its insolvency status and vowed to reposition itself “to honour, over time, its withdrawal obligations“. The platform did not specify when it will resume normal operations, however.
“In service of that commitment and to adhere to our risk management framework, we have activated a clause in our Terms of Use that will allow for this process to take place,” the team added.
“Our ultimate objective is stabilizing liquidity and restoring withdrawals, Swap, and transfers between accounts as quickly as possible. There is a lot of work ahead as we consider various options, this process will take time, and there may be delays.”
Cryptocurrencies aren’t going away. Buy Bitcoin & Litecoin here.
Ongoing Crypto Insolvency Crises
The unexpected move came after the Celsius reportedly transferred $320,000,000 worth of cryptocurrencies to FTX exchange. According to user reports, the mysterious and unusual move included movements from the platform’s main DeFi wallet, which saw large transfers at 12:00 CEST June 12.
🚨Celsius withdrew 50,000 Ether and 7,000 WBTC collateral from its Aave position in core DeFi wallet 0x8ace. 6,000 WBTC and 20,000 Ether (so far) have been sent to #FTX…
After receiving $169 mil $USDC from FTX… pic.twitter.com/xquMoIcyuZ
— Dirty Bubble Media: 🌡☠️ (@MikeBurgersburg) June 13, 2022
The platform’s native token is in free fall, dropping over 80% after Celsius paused withdrawals. Meanwhile, Bitcoin shed over 8% in the last 24 hours and is now testing fresh market lows at around $24,500.
The latest liquidity crunch comes just a month after the Luna Foundation was forced to exit its Bitcoin position due to unsustainable finances. When crypto protocols and platforms approach insolvency, they’ll have to sell inventory in order to service withdrawals. In the event of a bank run, platforms (such as Celsius) can choose to halt withdrawals until conditions improve.
This also happens in traditional finance. But in crypto there are no safety nets.
Last week, fresh reports showed fund inflows in Bitcoin of around $100 million into Bitcoin. High net worth investors tend to take advantage of the forced selling pressure in order to fill large buy orders in preparation for an eventual change in the trend.
(update: 19/06/2022)
Shareholders indicate a Rescue Plan is Underway
Celsius has halted withdrawals for six days so far, but the company’s financial woes may be coming to an end as Simon Dixon’s Bnk To The Future announces a potential rescue operation.
@CelsiusNetwork Recovery Plan – A Statement From me & Bnk To The Future https://t.co/FyF1Qaw6ZE
— Simon Dixon (Beware Impersonators) (@SimonDixonTwitt) June 18, 2022
In a press release on Saturday, CEO and Co-founder of Bnk To The Future, Simon Dixon revealed a commitment to a “bottom-up” solution for the lending platform.
I commit to supporting Celsius in any way that is useful. They have built a community that believes in bottom up and we have a platform and experienced team that can help Celsius bottom up.
He underlined that an innovative solution would likely need to emerge as a result of financial innovation, as was the case when the company supported Bitfinex in 2016.
Dixon also noted that the cryptocurrency sector has faced adversity in the past, and came out stronger because of it.
Our industry has come back stronger from every disaster and now is the time for us to offer support in a bottom up way in compliance with the regulations we have always followed.
Celsius’ liquidation price sits at $13,600 (BTC) at the time of publishing.
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