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The decentralized finance (DeFi) sector has been dealt another major blow. A month after the Terra collapse, investors in the Celsius Network were spooked after the platform announced it was halting functions like withdrawals, swaps, and transfers.
The Celsius announcement has coincided with a notable collapse in the crypto space. The global cryptocurrency market is currently at around $1 trillion, down from the November peak of $3.08 trillion. Bitcoin has dropped below $25,000 for the first time since December 2020.
Celsius halts user withdrawals
On Sunday night, Celsius announced that it was halting some functions on the network because of “extreme market conditions.” Over the past few weeks, crypto Twitter has been filled with speculations around the reliability of the Celsius network, and the FUD could have squeezed liquidity from the protocol.
“Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, Swap, and transfers between accounts. We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations,” the protocol said.
Celsius noted that the decision had been made in the community’s interest. The action would stabilize liquidity and operations while taking the necessary steps to protect user assets. Customers will continue to receive their rewards when the service has been halted.
“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. There is a lot of work ahead as we consider various options, this process will take time, and there may be delays,” the protocol added.
The action of Celsius to halt withdrawals has triggered a discussion that the network could be following in the footsteps of the collapsed Luna network. Investors who cannot withdraw their investments from the Celsius network are now worried that they could suffer the same losses.
Reports have also stated that the Celsius team deposited assets to FTX before halting withdrawals. Crypto reporter Wu Blockchain tweeted, “Celsius has transferred about 104,000 ERH to FTX in the past three days, including about 50,000 ETH today, 12,000 ETH yesterday, and 42,000 ETH the day before yesterday. In addition, Celsius also transferred about 9,500 WBTC to FTX today.”
Nexo Finance, a platform offering high-yield earn crypto products, tweeted that it had reached out to the Celsius team to acquire the protocol’s assets. However, it added that the Celsius team rejected their offer.
“Nexo is in a solid liquidity and equity position to readily acquire any remaining qualifying assets of Celsius, mainly their collateralized loan portfolio. We are putting together an offer to Celsius to that accord and will communicate it publicly,” the Nexo team added.
Crypto market bleeds
The market is yet to fully recover from the effects caused by the Terra LUNA crash. Therefore, this announcement by Celsius has led to a massive selloff of the protocol’s native token, CEL.
At the time of writing, CEL was down by 53.3%, and it was trading at $0.187, according to data from CoinGecko. The token is currently over 97% below its all-time high, and if the bleed continues, it could drop to notable lows.
The rest of the market is also down, but the losses are minimal compared to the CEL token. Bitcoin is down by 7% to trade at $25,000. Ethereum has been under intense selling pressure over the past few days, and at the time of writing, it was trading at $1329. Ether has been trading at the lowest levels since January 2021.
To learn more visit our Investing in Celsius Network guide.
Ali is a freelance writer covering the cryptocurrency markets and the blockchain industry. He has 8 years of experience writing about cryptocurrencies, technology, and trading. His work can be found in various high-profile investment sites including CCN, Capital.com, Bitcoinist, and NewsBTC.