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DeFi Lender Celsius Halts Withdrawals, Sends 104,000 ETH to FTX

By:
Sujha Sundararajan
Published: Jun 13, 2022, 13:24 GMT+00:00

Crypto lender Celsius transferred around 50,000 ETH today alone, and about 9,500 WBTC to the FTX exchange for an undisclosed reason.

celsius

In this article:

Key Insights:

  • Due to “extreme market conditions,” crypto lender Celsius paused all withdrawals, swaps, and transfers.
  • Celsius did not mention when it would call off the withdrawal freeze.
  • Celsius has transferred around 104,000 ETH to FTX in the past three days.

Crypto lending platform Celsius Network has been under pressure from all sides, including US state regulators. The embattled startup has drawn the ire of securities commissions from the states of Kentucky, Alabama, New Jersey, and Texas. The regulators believe the company violated security laws through its crypto “Earn Rewards” program.

Adding to it, Celsius’s native token CEL slumped after being affected by the broader crypto crash last month. The major sell-off was driven by the collapse of TerraUSD (UST) and its sister token Luna.

Now, Celsius users are facing another blow after the company paused withdrawals, swaps, and transfers, but there are conflicting reports about what actually happened.

Celsius halts withdrawals, leaving investors in shock

The crypto staking network Celsius experienced a chaotic weekend after announcing the hold on withdrawals, citing “extreme market conditions.” In the elaborate blog post, the firm said,

“We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations.”

Immediately following the announcement, the price of CEL fell sharply by 45% to $0.19 at press time. This triggered market stress in the sector bringing down the price of ether (ETH) to $1,237 as of press time.

The company noted that the act would “stabilize liquidity and operations” while taking steps to protect assets and benefit the Celsius community.

“We are working with a singular focus: to protect and preserve assets to meet our obligations to customers. Our ultimate objective is stabilizing liquidity and restoring withdrawals, Swap, and transfers between accounts as quickly as possible.”

The company did not specify an exact timeframe when it would resume withdrawal services.

What does it mean for users?

The news follows increased tension among Celsius users who vented on social media. One user spread the rumor that there is a possibility for locked Celsius accounts, “similar to Luna.”

The CEO of Celsius, Alex Mashinsky, hit back at the user denying such allegations and terming such rumors as FUD.

A sudden announcement of the temporary suspension of withdrawals has put users in a fix. Celsius community will not be able to withdraw until the company resumes its withdrawal services. However, Celsius promises customers that their accounts would meanwhile accrue interests.

Celsius Network platform, which has 1.7 million customers, offers an interest-bearing savings account, borrowing, and payments with digital assets and fiat money. This regulated lender lets users receive interest on deposited cryptocurrencies or take out crypto collateralized loans.

The mass exodus of assets

The digital assets lender has supposedly transferred around 104,000 ETH in total for the past three days to the FTX exchange today for unspecified reasons.

Moving massive amounts of ETH, wrapped bitcoin (WBTC), and freezing withdrawal services has stirred speculators. The crypto firm sent about 9,500 WBTC worth around $247 million.

One user noted that the possible reason could be to earn yields, while there are risks that it would create delta exposure. However, the exact reason for the mass exodus of assets between Celsius and FTX and the sudden suspension of withdrawals remains unknown.

The liquidity problem

Put simply, when a business does not have the liquid assets necessary to meet its short-term obligations, such as repaying loans, it faces a liquidity problem.

In this case, Celsius has been facing a liquidity crisis since last month, when CEL’s price dropped to $1 after customers complained about being unable to withdraw funds.

The firm would be trying to stabilize liquidity by replacing several volatile digital assets like WBTC and ETH, which the company withdrew from Aave.

Per the Cointelegraph report, since Sunday, Celsius has staked 204 million USD Coin (USDC) stablecoins on Aave. Additionally, the lender has deposited 10 million USDC and around 8.2 million Dai (DAI) stablecoins to Compound. 

The stablecoins re-staked by Celsius (222 million in total) is close to the value of removed WBTC assets.

Additionally, Mashinsky has been highly vocal in the recent past, blaming short-sellers on Wall Street as responsible for the overall crypto crash, including the fall of CEL and Terra network. He also recently told Kito News that the crypto markets would recover, and inflation is not a long-term concern.

About the Author

Sujha Sundararajan is a writer-journalist with 7+ years of experience in Blockchain, Cryptocurrency and in general, FinTech news reporting. Her articles have featured in multiple journals such as CoinDesk, Protos, Bitcoin Magazine, CCN, Asia Blockchain Review, BeInCrypto and EconoTimes to name a few. She holds a Master’s in Journalism from the Indian Institute of Journalism and New Media and is also an accomplished Indian classical singer.

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