A crypto lending platform’s native token is the latest casualty after a challenging month in the digital asset space that saw tens of billions of dollars disappear from an already hurting market. In a Sunday evening announcement, Celsius Network (CEL) said that extreme volatility in the cryptocurrency markets made it necessary to temporarily stop withdrawals […]
The post CEL Token Collapses 99% From Highs As Celsius Network Halts All Withdrawals appeared first on The Daily Hodl.
Liquid staking firms could default on their Ether obligations if "the Merge" does not happen.
The next big crypto crash could be around the corner due to Lido Staked Ether (stETH), a liquid token from the Lido protocol that is supposed to be 100% pegged by Ethereum's native token, Ether (ETH).
Notably, the stETH peg could drop against ETH by 50% in the coming weeks, raising the risk of a "DeFi contagion" as Ethereum moves toward proof-of-stake, argues popular Bitcoin investor and independent analyst Brad Mills.
In detail, investors deposit ETH in Lido's smart contracts to participate in "the Merge," a network upgrade aiming to make Ethereum a proof-of-stake blockchain, also called the "Beacon Chain." As a result, they receive stETH representing their staked ETH balance with Lido.
Users will be able to redeem stETH for unstaked ETH when Beacon Chain goes live. In addition, they can use stETH as collateral to borrow or provide liquidity using various DeFi platforms to earn yield.
But if the switch to ETH 2.0 gets delayed, this could cause a massive liquidity problem across DeFi platforms, Mills asserts, using Celsius Network, a crypto lending platform that offers up to 17% annual percentage yields, as an example.
"If customers start withdrawing from Celsius, they will have to sell their stETH," Mills explained. "Celsius has liabilities of 1 million ETH. So, 288k are inaccessible until [the] Merge, ~30K are lost, ~445k are stETH, and 268k are liquid. Could cause a run."
But regardless of unverified rumors that Celsius could be insolvent, the best way to secure your funds is to control your own private keys. He adds:
stETH might not 'depeg', but the risk of DeFi contagion in a crypto bear market is high.
Moreover, even centralized yield platforms could face insolvency risks due to their ETH liabilities, argues market commentator Dirty Bubble Media (DBM), citing crypto asset management service Swissborg as an example.
Swissborg offers daily yield on about $145 million worth of Ether it holds, including 80% exposure in stETH.
The firm had staked around 11,300 ETH out of its total Ether holdings in Curve's stETH/ETH pool. Then the ETH peg became imbalanced on May 12 in the wake of Terra's collapse with stETH/ETH dropping to 0.955 on the day.
"How is Swissborg paying daily yield on these assets, when the yield from staked Ether is locked along with the principal," questioned DBM, adding that it could have the firm "exit their entire stETH position," thus forcing its ETH peg even lower.
Meanwhile, the warnings coincided with a whale dumping its staked Ether positions for ETH on June 8.
Battening down the hatches before ropsten. pic.twitter.com/MPQV5n0XMf
— Hsaka (@HsakaTrades) June 8, 2022
Mills responded, saying that stETH's "dynamic is no different than GBTC at a perma-discount." In other words, sell-pressure can be "merciless" once the market flips bearish and yields vanish.
He explained:
"When there's deep liquidity & potential to arbitrage, quants, Wall Street raccoons [and] flashbois will milk the yield. When the strategy goes against them, they will add merciless sell pressure."
As of June 9, the stETH-ETH ratio had recovered to 0.97, still 3% below its intended peg.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
"Our front office teams [...] think and act like risk managers to ensure that we are not exposed in any significant way to market swings," said Celius CFO Rod Bolger.
The fallout from extreme volatility in the crypto market hasn’t significantly affected Celsius Network, according to its leadership.
Seemingly in response to a now deleted tweet from Twitter user David Belle that claimed the platform had been “completely wiped out,” Celsius CEO Alex Mashinsky posted a message to his more than 172,000 Twitter followers that “all funds [were] safe” and the platform was continuing to do business. Mashinsky acknowledged the “extreme market volatility” currently impacting projects including Terra (LUNA) and stablecoin TerraUSD (UST).
Rumblings that Celsius is getting wiped out, if you have funds with them this might be your last chance to make a move before its too late. So far just rumors, but consider this fair warning!
— MGCryptoPulse (@MGCryptopulse) May 11, 2022
Notwithstanding the extreme market volatility, Celsius has not experienced any significant losses and all funds are safe.
— Alex Mashinsky (@Mashinsky) May 11, 2022
The LUNA price has fallen more than 93% in the last 24 hours to reach $2.18 at the time of publication following a mass sell-off, with UST having dropped roughly 40% to a price of $0.55. On Tuesday, Terra co-founder Do Kwon hinted at a “recovery plan,” later adding he supported community proposals to increase the project’s minting capacity. However, Mashinsky said that the platform was “not involved in any Luna bailout” in an effort to save the project.
"Our top priority is to ensure that all digital assets on our platform remain safe and secure," Rod Bolger, chief financial officer at Celius, told Cointelegraph. "Our front office teams also think and act like risk managers to ensure that we are not exposed in any significant way to market swings. Our liquidity position remains very strong."
Related: Terra (LUNA) hits new all-time high after 100% rebound from 2022 lows — Correction ahead?
The uncertainty around UST’s de-pegging from the U.S. dollar has impacted the price of major cryptocurrencies including Bitcoin (BTC) and Ether (ETH), both of which have fallen more than 21% in the last week. Major crypto exchange Binance also temporarily suspended withdrawals of LUNA and UST withdrawals on Monday, citing network congestion.
The CEO of centralized finance platform Celsius Network (CEL) is predicting a six-figure price for Bitcoin (BTC) later this year. In a Kitco News interview, Celsius head Alex Mashinsky says that Bitcoin will surge above $100,000 before the end of 2022 if it can overcome several key psychological resistance levels. “I think we’re definitely going […]
The post Bitcoin (BTC) Will Hit $100,000 in 2022 After Blowing Past These Key Resistance Zones: Celsius Network CEO appeared first on The Daily Hodl.
Leading US-based crypto exchange Coinbase is adding to its burgeoning arsenal of digital assets by extending custodial services to a dozen altcoins. Coinbase says it’s adding 12 new virtual assets to the growing roster of cryptocurrencies that are part of the Coinbase Custody trust. Coinbase Custody is a custodial service for institutional investors who want to […]
The post Coinbase Adds Custody Support for 12 Altcoins As Crypto Markets Bounce Back appeared first on The Daily Hodl.
The CEO of centralized finance platform Celsius Network (CEL), Alex Mashinsky, is unveiling price predictions for the two largest crypto assets by market cap. Mashinsky says in a Kitco News interview that Bitcoin (BTC) could fall by up to 20% from the current price before surging. “So we have very strong support in that $29,000 […]
The post Celsius Network CEO Predicts New All-Time High for Ethereum, Warns Bitcoin Could Crash Before Massive Rally appeared first on The Daily Hodl.
The U.S. Securities and Exchange Commission (SEC) is probing several cryptocurrency firms that offer high-interest yields amid a broader governmental effort to regulate digital assets. According to a new Bloomberg report, the SEC is specifically looking at the methodology that Celsius Network (CEL), Voyager Digital Ltd. and Gemini Trust Co. employ when paying interest on […]
The post SEC Probes Three Crypto Firms in New Enforcement Review: Report appeared first on The Daily Hodl.
Celsius CEO Alex Mashinsky said that the oversubscribed $750 million funding round was a “very good indication” of the strength of the company's lending and yielding brand.
Crypto lending firm Celsius Network has expanded its $400 million Series B round from October to $750 million as a result of oversubscription in the firm’s capital raise.
The company is now valued at $3.5 billion following the raise and CEO Alex Mashinsky told Cointelegraph he expects that figure to “double or triple” next year which would see it valued between $7B and $10.5B
The firm previously closed the round on Oct. 12 amid a period of intense scrutiny placed on crypto lending firms from local regulators. Celsius CEO Alex Mashinsky emphasized at the time that “it’s not $400 million. It’s the credibility that comes with the people who wrote those checks.”
In an announcement shared with Cointelegraph on Nov. 25, Celsius outlined that new funds will go towards expanding into new markets and product offerings, along with building its recently announced centralized finance (CeFi) to decentralized finance (DeFi) bridging project “CelsiusX”.
Celsius will also allocate funds to improving the “utility of its platform” and its commitment to sustainable Bitcoin (BTC) mining.
Speaking on the $750 million funding round with Cointelegraph, Mashinsky said that the fact that the round was oversubscribed shows a “very good indication” of the strength of the Celsius brand, which he said was user focused.
“If you think of what we do, which is pay yield to the community, you know, we paid over $1 billion to our community and we basically get that yield from exchanges and institutions. And most of our competitors [...] they charge the customers fees and give all that money to their shareholders,” he said.
Celsisus outlined plans earlier this week to invest an additional $300 million into scaling its BTC mining operations in North America, taking its total spend on the sector to $500 million.
Mashinsky attributed his bullish estimate of Celsius’ value in 2022 to the firm’s ability to provide services in almost every sector of crypto, as he highlighted the growth potential of the business:
“I think that by itself it is worth several times what we invested. So between that and the growth of our core business, you know, the yield business, the lending business or the mining business, the DeFi business, all these things are obviously huge.”
The Celsius CEO also pointed to the $115 million acquisition of crypto custody platform GK8 at the start of this month, and revealed the firm has plans to enter the NFT sector in the near future, although it won’t be launching a marketplace as he feels there are already too many similar platforms out there.
“We think we can help kind of expand the category into other use cases or other ways of, you know, unlocking value for brands,” he said.
Related: Crypto lending firms on the hot seat: New regulations are coming?
Questioned on the firm’s $20 million crowdfunding round from August 2020, in which more than 1000 investors from the Celsius community backed the firm. Mashinsky said the firm was valued at around $150 million at the time, and while investors are currently unable to sell their holdings, it has turned out to be a handsome investment for them:
“Basically those 1000 people made on average, what is it, 25 times of their money or something like that? Obviously, it's not liquid, they can't sell it tomorrow. But we think that they are super happy.”
