There’s no easy way to say this, but current crypto-market conditions can only be described as ‘extreme.’ In fact, ongoing corrections saw the price of Ether and other cryptocurrencies tumble, with many seeing significant liquidations within the market.
The implications of a further drop could lead to the liquidation of nearly $500 million in on-chain collateral. The asset ratio of the stETH/ETH pool has already been part of an unbalanced condition… Now what’s next?
Pausing YOUR flow
Popular crypto-lending and staking platform Celsius is indeed facing the heat of the harsh conditions. According to its latest announcement, the platform has paused all withdrawals, swaps, and transfers between accounts on its platform due to “extreme market conditions.”
“Due to extreme market conditions, we are announcing today that Celsius is suspending all withdrawals, exchanges and transfers between accounts. We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations.
That being said, customers WILL “continue to accrue rewards during the pause.”
Even so, there are legitimate concerns to be had. For example, the company reportedly had around $12 billion in customer assets in May out of 1.7 million users. If things go wrong, anything can happen.
Unstaking the staked, for?
Even though the platform has halted withdrawals to stabilize liquidity and operations, claims on social media suggest the network might be facing a liquidity crisis.
Celsius was previously rumored to be a seller of stETH to restore liquidity to user withdrawals, which could trigger liquidations. Just as the news was rolling in, Celsius reported another exodus, as Colin Wu pointed out.
According to the same, the platform unstaked nearly $250 million worth of Wrapped Bitcoin from Aave and sent it to the FTX exchange. In addition to WBTC, it appears that a lot of ETH worth millions saw an exodus to FTX as well.
However, all of these tokens were sent to the FTX exchange for some unknown reason. Nonetheless, the Celsius team’s plans with unstaked tokens still remain unclear.
Two possible moves come into play here, as highlighted by a 13 June tweet below –
Still, one would have to wait and watch until the platform explains the said decision. Until then, the crypto market could see more selling, that is, if the Celsius network continues to sell more and more assets to maintain its liquidity obligations. In fact, something as serious as the Terra fiasco could also come into play.
Another concern connected to this case is the platform’s insolvency in their ETH positions. Only 27% of Celsius’s ETH is liquid, the rest is either stETH or 288,000 ETH staked in an ETH 2.0 contract. This makes all this ETH inaccessible for at least a year. Indeed, not a promising scenario here…
Additionally, CEL, Celsius’ own token, has fallen over 90% in the past 24 hours. It was trading at $0.2 at the time of writing.
