Celsius Network (CEL) hit the spotlight yesterday for all the wrong reasons as it crashed 70% in the indices. The fall sent jitters in the crypto sphere that the Celsius token could be the next Luna and collapse to $0. CEL’s fall came at a time when Bitcoin slipped below the $25,000 mark for the first time since December 2020. The entire crypto market was a sea of blood indicating that the worst is yet to come.
Celsius Network also paused withdrawals to “stabilize liquidity” and limit the damage that’s hammering the token. However, the ‘pausing’ of withdrawals came with its own share of scrutiny as investors alleged that the network had moved its liquidity to the FTX exchange two hours prior to announcing that they were pausing withdrawals. Read here to know more about the accusations pinned against the top-level management of Celsius Network.
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What Is Celsius Network?
Celsius Network is one of the largest ‘centralized’ gateways to crypto. It had previously raised a staggering $864 million through venture capital and was poised to take over the crypto sphere. The network had custodied over $3 billion worth of funds via cryptocurrencies for its whopping 1.7 million and growing user base.
For the uninitiated, Celsius is a ‘do it all’ fintech app that allows users easy and trusted services on cryptos. The fintech app allows trading cryptocurrencies, delivers high-yield deposits on users’ stablecoins and cryptos, and also has a feature of crypto-backed lending.
The network also has its own native token CEL and the whitepaper is available in its website. CEL token is lucrative to trade as it offers rewards, discounts and points for using the Celsius services.
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The Fall of Celsius
As the saying goes, ‘all things that go up must come down’, which has eventually caught up with Celsius. As of today, Celsius Network appears to be insolvent and is unable to pay the debts it owed.
Despite achieving so many things in such a short period of time, Celsius still underperformed. But why did it underperform you may ask? Well, here’s the thing. Promising a high yield on crypto deposits can mostly end up biting one’s own back as the model is not sustainable. Therefore, Celsius fell prey to its own language and its work module came under the radar.
The network’s language and rhetoric were brash and had meaningless yet ridiculous anti-bank remarks such as:
Banking is broken
Unbank yourself
Replace Wall Street with Blockchain
99% vs 1%.
While all the above can simply be brushed off as ‘marketing techniques’, its safety and security measures took a beating after it paused withdrawals for users. Its safety and security measures state:
Withdraw your crypto at anytime – (Which it didn’t allow during yesterday’s crash)
Keep your crypto safe – (It was not, as they hold the main keys)
Next-level transparency – (Failed to provide a convincing statement on why they paused withdrawals)
Why trust Celsius – (The trust is now eroded).
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Also, its dependence on permissionless on-chain money markets MakerDAO added to its death spell. Celsius had a nine-figure loan with MakerDAO and that is where things went wrong. Twitter user ‘Jonwu.Aztec’ has detailed in-depth findings of Celsius and MakerDAO’s lending protocol. Read the below Twitter thread to know more about how it all played out.