Difficulties at Celsius and a fund withdrawal halt on Binance
By Alex Panasenko 2091 14 Jun 2022
One of the largest landing providers on the crypto market, Celsius Network, has faced serious problems that threaten a complete stoppage of the service and bankruptcy.
On June 13, in the official Medium, the project team announced that it was suspending the possibility of withdrawing, exchanging, or transferring funds “due to extreme market conditions.”
The incident is associated with an impulse falling of quotations of almost all cryptocurrencies. As a result, their total capitalization fell below $1 trillion. As a reminder, at the end of 2021, this figure exceeded $3 trillion.
But what was especially painful for Celsius was the loss of the link to the value of its underlying asset (the main DeFi currency Ethereum) by the stETH synthetic token. A few days before the blocking of transactions, there was a high exchange activity of Celsius-affiliated wallets that sold off stETH. Even then, there were suspicions that the platform might face an increased need to meet its obligations due to the loss of value of the security.
The native Celsius token collapsed by 50% in a few hours. As is typical for the modern DeFi sector, it caused panic, a dramatic rise in withdrawal requests, and the risk of a cascading liquidity squeeze.
Volumes on June 13 looked apocalyptic, so technically, it was an unfortunate necessity for Celsius to block transactions.
All this time, they have been desperately increasing the size of their bitcoin margin on the exchanges. But, in the event of a further market collapse, Celsius may face compulsory closing of positions. According to some experts, the liquidation level for the company is the price of $17,211 per BTC.
A helping hand to the sinking ship Celsius was given by their competitors, the Nexo crypto lending platform, which offered to buy back the “problematic” credit portfolio.
But Celsius rejected Nexo’s offer. It either believes its reserves will be enough or has decided to go all-in.
One of the official partners of the Celsius Network, the German bank Nuri, announced on its website that it is temporarily freezing the opportunities to invest in its Bitcoin Interest accounts. Interest incomes will continue to accrue, but it will be possible to get them only after the lifting of restrictions by Celsius.
The Binance exchange, against the backdrop of ongoing events, also suspended the possibility of withdrawing bitcoins from its platform “due to a hung transaction.” The company’s CEO had to assure users that their funds were safe personally.
Instead of the declared 30 minutes, it took more than two hours to resolve the issue, which caused the community’s suspicion that the real problem was not the transaction, but the exchange’s unwillingness to assume additional risks in such a rapidly falling market.