A Celsius Collapse? Locked Funds, Panic, Retail suffers again
Celsius Network halts withdrawals, swaps, and transfers. Crypto market takes a nosedive. How low can we go?
What an insane week for our beloved internet monies. All hell broke loose when Celsius announced they were halting withdrawals, swaps, and transfers between accounts. Once the news was out, the whole market plunged into oblivion. Funny enough, a day prior, Celsius Ceo Alex Mashinky tweeted that Celsius was potentially halting withdrawals was all fud. This cycle seems to have a knack for humbling the biggest names in crypto.
Bitcoin went as low as $20,800, Ethereum, the second largest market cap cryptocurrency, saw a price of $1075 at the low of the day, and altcoins, well, you know what happened to them.
The saying goes where there's smoke; there's fire. Many on Twitter warned of the impending dangers and potential insolvency of Celsius due to their portfolio. Celsius had around $3.8 billion in assets under management and $1.2 billion in debt. The on-chain data identified that they were severely overleveraged “jacked to the tits,” with 445k of stETH worth ($1.5 billion) in their largest position. The first sign was the de-pegging of stETH (1 Eth = 0.93 stETH) from Eth. The liquidity in the curve pool was drying up. An imbalance was a telling sign that soon, everyone might be rushing for a crowded door.
One of the clues indicating this would happen was Alameda cashing out. Alameda one of the biggest players in crypto is always first on big moves, and they were one of the earlier players to exit. They sold 50k stEth in a few hours while taking huge slippage losses, drying up the liquidity even further.
The leveraged loan on MakerDao, which started with $18k worth of BTC is something to keep an eye on. The liquidation price was at $22500, but at the time of writing, Celsius quickly topped up their collateral with additional BTC so they wouldn't get liquidated, making their current liquidation price at $17000.
I believe many whales and institutional smell the blood and are trying to force a liquidation on Celsius. The market has behaved so that I think Celsius’s destruction is just a matter of time. If that is the case, we might be seeing Bitcoin going below the 2018 $20k all-time high.
Celsius has billions of illiquid positions where they must take out loans to pay their customers. They were already insolvent at this point, and the only option was to halt withdrawals to buy time until the market changed direction. Many retail got fleeced once again, some had their remaining life savings held in Celsius, and others needed to use that money to repay a loan but couldn't due to all their funds being locked up.
Celsius is no stranger to horrible money management. They had $500 million of user's fund deposited into Luna / UST ponzi collapse. A $50 million Badgerdao front-end exploit and $70 million in the Stakehound loss.
All eyes are on Celsius right now. The markets keep descending close to 2018 levels, and whales and market makers know Celsius’s liquidation price. The question is if Celsius collapse how big of a ripple effect do they cause and what other big players are connected to them?
Note: None of this financial advice. It is purely for entertainment purposes only.