Cryptocurrency markets have been making investors vomit blood for the last two days. So much so that Bitcoin even fell below the 29 thousand dollar band, which is one of the strongest support levels in recent times. Bitcoin, which has regressed to $ 21 thousand in the last 24 hours, is at $ 22 thousand 400 as of the writing of this article. The situation in altcoins is worse than Bitcoin. So what happened to the markets? What is behind this decline?
As a matter of fact, the cryptocurrency markets were walking on a very thin tightrope. The Terra (LUNA) event, which happened about a month ago, damaged the confidence in the markets, causing even altcoins indexed to the dollar (always around 1 dollar) to be approached with suspicion. Others believe Celsius is the main reason for yesterday’s drop. So what is this Celsius thing?
Celsius was giving loans over cryptocurrencies and providing interest income
Celsius, one of the names in the industry for a long time, has in its simplest terms, credit and interest income. establishment. The company promised certain rates of return to crypto money investors and took the investor’s money. The money in the pool was also loaned to others as a loan. The company, which adapted the working principle of a standard bank to crypto money, therefore, from time to time, faced with the competent authorities.
Celsius has succeeded in being one of the companies that attracted the attention of investors. The company, which performed very well in 2020 and 2021, reached a valuation of 10 billion dollars as of the end of last year. So how did these guys make money? Actually, the system was very simple. The profit rates given to the investor were kept at a reasonable level, and the profit on the rise was directly transferred to the company. There was also interest-bearing loans.
“Terra (LUNA) collapse created a domino effect for Celsius”
The first incident to allegedly throw a stone at Celsius, the Terra (LUNA) scandal it happened. Ultimately, the company was obliged to give stakes to its participants, but the collapse of Terra (LUNA)’s stablecoin UST caused Celsius to lose. It is claimed that the damage here could be around 500 million dollars. But that’s not the whole problem. When the markets were falling, the investor trying to escape wanted to withdraw his money. And that puts things in an even bigger stalemate for Celsius. Because while the company kept some of the deposits in locked Ethereum pools, the cash shortage has reached the level it has never been.
Almost all of the company’s assets belong to customers
Jack Niewold, who made the allegations that we have conveyed so far, also spoke about the assets of the company in his Twitter post. Allegedly, $10 billion of Celsius’ money belongs to customers. The size of the company’s own money is only $ 1.5 billion, and this money is kept in various crypto money wallets. In other words, the gap is unprecedentedly wide and it is not possible to get out of the business here.
Withdrawals suspended!
Celsius is aware of the problem. As a result, it took a decision that attracted the reaction of the investor. As part of this decision, all withdrawals and transfers on the platform were suspended. The company cited ‘extraordinary market conditions’ as the reason for the suspension, but the main reason is its inability to pay the investor who wants to withdraw his money.
What happens next?
Celsius has several options ahead of it. One of them is to be able to give the money to be withdrawn to the customer. Cash is required for this. Celsius can pay out of its own budget, if any, or bail out its customer by borrowing huge amounts. However, if these cannot be done, the main problem arises. The company may come to the point of bankruptcy or even declare bankruptcy. If this possibility occurs, we can say that the shattered trust in the cryptocurrency community will not be easily recovered. Because there is a $10 billion dollar bill…
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