Fuzziness reigns in the crypto planet.
Is crypto lender Celsius Network insolvent?
On the night of Sunday to Monday, the firm announced that it would suspend indefinitely various transactions, including withdrawals of funds, without explaining what had caused such an extreme decision.
"Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, Swap, and transfers between accounts," the company said in a memo published in Medium. "We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations."
"Acting in the interest of our community is our top priority. 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."
Celsius didn't elaborate about the "extreme market conditions."
'Formal Offer'
Celsius did not give the reasons that led to these decisions, leaving investors to jump into the game of speculation. These speculations have just intensified with the announcement by crypto firm Nexo AG that it sent a letter to Celsius containing an offer to buy "remaining qualifying assets of Celsius Network LLC and Celsius Lending LLC,"
"After what appears to be the insolvency of @CelsiusNetwork and mindful of the repercussions for their retail investors & the crypto community, Nexo has extended a formal offer to acquire qualifying assets of @CelsiusNetwork after their withdrawal freeze," the firm wrote on Twitter, with a link to the letter sent to Celsius.
"Nexo’s underlying sustainable business model has allowed it to maintain financial stability in any market circumstances and as a result, the company is in a solid liquidity and equity position to help mitigate the consequences of Celsius’ distressed state," the potential buyer wrote in its letter of intent.
The firm added that it "could readily acquire from Celsius part or all qualifying, outstanding collateralized loan receivables secured by their corresponding pledged cryptocurrency collateral, subject to Nexo’s risk management and collateral requirements."
Contacted by TheStreet, Celsius did not respond immediately.
"We believe that our decision to pause withdrawals, Swap, and transfers between accounts is the most responsible action we can take to protect our community," Celsius explained.
The firm promises to restore withdrawals but does not provide any timetable.
"We are working with a singular focus: to protect and preserve assets to meet our obligations to customers," Celsius Network said. "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."
News about Celsius is a shock wave for the crypto market already plagued by the UST/Luna coins scandal. UST, or TerraUSD, a so-called stablecoin, lost its dollar peg when millions of investors all wanted to redeem their tokens at the same time.
The debacle of UST and Luna, which are sister tokens belonging to the Terra ecosystem, caused more than $55 billion in losses for investors.
Celsius Shakes the Market
Cryptocurrency prices were thus down sharply. Bitcoin, the king of crypto, fell by more than 12.5% in the last 24 hours, according to data firm CoinGecko. The first digital currency by market cap is now moving to its lowest levels since 2020 at $23,972.74.
Ether, the second cryptocurrency by market cap, lost more than 17% to $1,224.67. Ether has lost almost 75% of its value since its all-time high set last November.
Dogecoin was down 17.6%, and Shiba Inu was down 14.5%.
CEL, Celsius Network's native token was down 55% at $0.185037. CEL is down 97.7% from its all-time high of $8.05 reached in June 2021.
Overall the crypto market has lost over $2 trillion since its November highs. It is currently worth $1.02 trillion.
Celsius is a cryptocurrency lending platform. The company allows anyone to borrow cryptocurrency and earn interest for lenders.
"Earn high. Borrow low. Change the world," the firm says on its website. One of its catch phrases is "Borrow like a Billionaire."
Celsius, through its CEL token, promises "financial rewards" as much as 30% extra returns weekly. But some options are not available to U.S. based users.
When it raised $400 million last October from investors led by WestCap and Canadian Caisse de dépôt du Québec (CDPQ), Celsius Network saw its valuation soar to $3 billion. The company wants to be an intermediary between traditional finance and the sphere of cryptocurrencies.
The firm has been in the sights of the authorities for some time now. The New Jersey Bureau of Securities had ordered the platform to stop offering and selling interest-earning cryptocurrency products.
Last year, the Texas State Securities Board accused Celsius Network for not offering securities licensed at the state or federal level.
