Celsius Pauses Withdrawals — Here’s Everything You Need To Know

Celsius pauses withdrawals, swaps, and transfers. Find out what this means for you whether you are or not a customer of the crypto savings and lender. 

*This is an ongoing story. Check back for updates.


Celsius Announces Pause

Late last night, Celsius Network alerted its customers via email that “Due to extreme market conditions” it’s pausing withdrawals, swaps, and transfers on its platform. According to the email, the pause appears to be for an undisclosed amount of time.

“We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations.” Celsius is a crypto savings and lender with, according to their current estimates, over 3 billion in Assets Under Management. Celsius offers exceptionally high rewards for customers on their platform by offering loans as well as leveraging customer assets in DeFi.

“We are taking this necessary action for the benefit of our entire community in order to stabilize liquidity and operations while we take steps to preserve and protect assets,” Celsius said, further adding, “We are working with a singular focus: to protect and preserve assets to meet our obligations to customers.

The amount of the assets they currently have isn’t entirely clear. Their website claims to have over 150 BTC worth of total assets (that includes all crypto). However, a fair amount of their assets are illiquid, seeing as they have staked Ethereum and it’s unwithdrawable for a year.

Not to mention, the amount of assets can be severely diminished with some margin calls. In particular, Celsius holds a wBTC position on Maker DAO. Earlier this morning, its liquidation price stood at $22,500 USD. The current price of Bitcoin is $23,500. However, Celsius was able to add collateral bringing its liquidation price to $20,272.

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Is Celsius The Next Terra Luna?

Pausing withdrawals is hardly uncommon in crypto. Usually, it comes disguised as a convenient “maintenance” pause. That’s not to say Celsius deserves credit for being honest here. They already had issues with withdrawals this weekend and tried to assuage fears. Everyone would have rolled their eyes at “Closed For Maintenance” sign.

Nevertheless, that didn’t stop Binance from having an issue with Bitcoin withdrawals. They claim to allow users to withdraw using the BNB chain and Ethereum. However, those withdrawals are limited to wallets or other exchanges which accept those networks. This obviously limits the ability to withdraw the world’s biggest asset from Binance.

This is to say, in a long-winded way, that Celsius announcing a pause isn’t enough to indicate that Celsius is done. This is just how crypto works in its centralized form. On the other hand, a “pause” of this nature doesn’t bode well for Celsius’ future.

The obvious comparison here is Terra Luna’s collapse. It was almost a month to the day when Terra began its collapse, so the similarities are striking. Like Terra, Celsius’ founder made brash pronouncements on Twitter to fight FUD. Not to mention, Celsius appears to be more interested in saving its liquidation price, similar to how Terra kept throwing Bitcoin at UST.

However, there are some significant differences. For one, Celsius also owns other assets that could help stave off a collapse like its Bitcoin mining division. Also, unlike Terra, they have assets spread out through DeFi. If they are able to withstand liquidation, customer assets could be returned. That is a big of though.

The biggest problem Celsius will face will be a “run on the bank”. Because, even if they manage to unpause withdrawals, confidence is forever shaken. The majority of their customers will rush to remove their assets from the platform. , Barring a miraculous wick up for Bitcoin, and Ethereum, it’s not looking great for Celsius customers to get their money back.

Nexo Makes Buyout Offer

There was a brief glimmer of hope that Nexo might step in to help Celsius customers. The Celsius rival tweeted out an offer to essentially purchase the Alex-Mashinsky-led platform.

However, it appears like the offer wouldn’t help the majority of Celsius’ customers that invested their crypto on the platform. The offer is focused on purchasing the outstanding loans and the assets backing them. Moreover, it says the offer would extend to “brand assets and the customer database of the Seller, free and clear of all encumbrances.” The free and clear part likely means Nexo wouldn’t be encumbered by the debt owed.

Beyond that, the offer doesn’t even specify an amount. It’s safe to say — especially considering the fact that Nexo used Twitter — the announcement isn’t to help overexposed retail customers, but rather to flex. Most of Celsius’ assets are customers using its savings option — the lending part is a far smaller part of their business.

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Celsius Survives Another Day And Gives An Update

Celsius managed to get through the night relatively unscathed. The beleaguered crypto platform was obviously under attack from shorters thanks to their perilous wBTC position on MakerDAO. Early on Monday Celsius had added collateral to bring their liquidation price down from 22k to 20k.

That liquidation price seemed fairly safe until Bitcoin hit 21k. In response, Celsius added collateral twice first bringing it to 18.5k and then to 17.5. The latter number, funny enough, is the bottom of a so-called rainbow.

Coincidence or not, Bitcoin’s price didn’t end falling below 21k. Bitcoin has since “mooned” to the $22,280 range. Nevertheless, Celsius brought down its liquidation price to below the rainbow to $16,850.

After surviving the night, Celsius decided to pseudo-update its customers via Twitter: “Celsius Network is working as quickly as possible and will share information as and when it becomes appropriate. Acting in the interest of our community remains our top priority.”

Obviously, the update left much to be desired since it gave no guarantee that deposits are safe, nor did it provide a timeline for a return to business as usual. To be fair, this isn’t uncommon in the world of crypto. For one, major exchange Okex was down for over a week after a hack, but then returned to normal. Considering the market conditions, a return to normal seems far-fetched.

Not to mention, June is still young. With several big money options expirations coming up in the next few weeks, it’s likely that the bottom of the rainbow will be tested. The question then is will Celsius allow users to withdraw while it remains under attack? It’s certainly within its right to do so, thanks to the fact that they have your keys.

Voyager Says They Are Celsius Free

Compelled by rumors, Voyager released a statement on its ties to Celsius. It had been reported that they were invested in Celsius, however, Voyager says that “ongoing due diligence and risk management process” led to it divesting from the platform.

Voyager, which calls itself a “turnkey” crypto solution, offers some similar services to Celsius like earning interest, however, it’s a lot more focused on being an exchange.

For what it’s worth, Voyager’s CEO, added that Voyager is in a good spot moving forward: “The company is well capitalized and in a good position to weather this market cycle and protect customer assets. It is Voyager’s goal to continue to build secure products and services, as well as build trust and leadership in the cryptocurrency industry.”

Voyager was compelled to clarify its relationship with Celsius thanks to a resurfaced Substack article that, using a filing from 2021, went to great lengths to prove that Celsius was a counterparty on Voyager’s earnings reports — Voyager is publicly traded in Canada. Funny enough, the article made it seem like it was a bombshell that Voyager was involved with Celsius, but it had been previously acknowledged by Voyager that Celsius held assets for the exchange. 

Even if the article has correctly identified Celsius on the filing, it doesn’t really amount to much. It appears the assets on loan aren’t significant enough to cause any issue (under 59 million). Not to mention, those small amounts may no longer be on the books.

Taking a look at Voyager’s most recent filing for the period between June 2021 and March 31st 2022 shows that Counterparty C is now listed under the US rather than the UK. Celsius was forced to move from the UK to the US in June of 2021. Other than that there is no evidence that points to Counterparty C as being definitively Celsius. If true, the loans are so small (just under 300k) that it’s not unrealistic that Voyager has completely divested itself from Celsius. And, even if it hasn’t, it’s hardly a concern considering the numbers we’re looking at.

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