Celsius is on the verge of a thunderstorm? Is the last pull up a dying struggle?

Hello everyone

How are you all these two days?

Here comes the "Don't Cut Me" series again

I am a little leek who is still full of hope for the industry

like wishing all the hospitals would close

I also hope that one day I can't find the material of "Don't Cut Me"

Unfortunately, things backfired

Let's have a plate of Celsius today

It is also well-known in the DeFi circle

such a well-known project

Why did the news of the thunderstorm come out?

what does it do

According to the market data, although there has been a rebound in the past two days, it is hard to say that this is not a flashback, and the last wave will be cut before running.

A few days ago, negative news about Celsius has swept the entire encryption circle and news social media. Will it be the next object of thunder? What the hell is Celsius doing? Let me analyze and analyze:

What is Celsius Network?

Celsius Network is a decentralized finance (DeFi) platform and one of the largest cryptocurrency lenders. Operating with an economic model that challenges the traditional banking model, offering interest-bearing savings accounts and lending services, as well as payments in digital and fiat assets.

Cel is the native token of CelsiusNetwork, launched in June 2018, supporting the income and reward system of CelsiusNetwork.

1. Insufficient liquidity

On June 6, according to the analysis of Twitter user @yieldchad, CelsiusNetwork may be insolvent at present. The project has a total of 1 million ETHs, but only 268,000 (nearly 27%) have sufficient liquidity; the other 445,000 are Lido’s stETH, which can only be exchanged for 287,000 ETHs at the current Curve exchange rate ;The last 288,000 pieces were directly pledged into the Ethereum 2.0 contract, so they cannot be withdrawn for at least one and a half years. At the rate of 50,000 ETH per week, Celsius will run out of liquid ETH within five weeks, and due to the insufficient liquidity of stETH, it is impossible for Celsius to cash out the redemption without realizing the huge loss. Well, they will be forced to close all redemptions.

Although the second conclusion is controversial, Celsius exposes more than that. If you can see the whole leopard at a glance, you can imagine how many problems he has.

1. self-inflicted

As if to verify the above statement, on June 13, Celsius suddenly issued a statement announcing that it would suspend all cash withdrawal, currency exchange and transfer services. Officials said the action was taken to enable Celsius to better meet its withdrawal obligations. Celsius emphasized that the actions we take are necessary for the benefit of the entire community and the protection of users' assets. The ultimate goal is to stabilize liquidity and restore withdrawals, transactions, and transfers between accounts as soon as possible.

The reason added later is the need for "extreme market conditions" and "stable liquidity".

In my opinion, this sentence is equivalent to, don't worry about leeks, I will make an announcement to scare you first, I will run first, and whether you can survive or not, I don't care about my business.

Within hours of the announcement, Celsius’s native token, CEL, plunged 70% in a single hour; by the next day, it was trading down another 40% or more. CEL's downward spiral, which comes amid a massive market sell-off, has sent the total cryptocurrency market capitalization plummeting to less than $1 trillion, more than two-thirds below its all-time high of $3 trillion, while bitcoin fell to its highest level since 2020.

Some time ago, the panic caused by Terra has not dissipated, and the cryptocurrency market has triggered a new round of panic because Celsius suddenly announced the suspension of user withdrawals, currency exchanges and transfer services. As for Celsius’s suspension of withdrawals without warning, investors at home and abroad complained that Celsius had no right to do so.

1. On-chain leverage

On Celsius, Bitcoin accounts for about 3% to 8%, Ethereum is about 4% to 8%, and USDT is about 9% to 11%. This is a problem. These coins are relatively stable, so there is no risk Where does the high rate of return come from?

The lending business is a relatively stable and mature business model, but it faces a problem. Not all funds can be matched and generate income. If the capital efficiency is low, the APY will be low, which will eventually affect the absorption of deposits. These problems are not big in the bull market, but when the opportunity for stable arbitrage is gone, Celsius has to use financial instruments with higher and higher risks in order to create high returns for users in the bear market. For example, the Anchor Protocol of the Terra ecology, Celsius used to be a super giant whale on Anchor, and sent hundreds of millions of dollars in encrypted assets to Anchor before the thunderstorm, which became one of the last straws that finally crushed UST.

All of the above signs indicate that something has gone wrong with CEL for a long time, but it has only recently exploded. Counting past problems in detail, in the bull market at that time, everyone didn't believe it. Even if they believed it, as long as the trend was good and they could make money, they could choose not to believe it. Through various recent and past performances, coupled with the trend of the market, CEL is only a straw away from being able to return to zero. This is not uncommon in the currency circle. If there are benefits, it may be that someone will start planning to engage in it now.

write at the end

A few days ago, Sequoia sent a letter to the founders, saying that the most severe moment has come, and this time the economy will not reverse like a V-shaped one at the time of the new crown epidemic. In the letter, there is such a sentence: it is a waste of time to take chances, don't sit around discussing the old good times and expect it to come back. This is an era of controlling change amid uncertainty, and learning to "survive the fittest" is everyone's homework.

The crisis has come quietly, but many people are unwilling to face it, but the fact is that the winter of various industries is approaching. In such an environment, in addition to learning, it is to maintain funds. In the blockchain industry, the leftover is king, and I hope we will see you at a high place.

The above views represent the views of the author only, not the views of the platform. Investment is risky, please invest carefully!