In the last week, everyone has been talking a lot about Celsius Network, and there is a good reason for this. The platform is at the center of the storm that is happening right now with cryptocurrencies and the market's downward trend. For more information visit this Website and get some points about the crypto world.
Many people thought the company would do what it did a few days ago: it stopped all withdrawals, swaps, and transfers between accounts. A lot of people worried that this would happen. Users can't really get to their assets because the company says, “Doing what's best for our community is our top priority.”
How does the Celsius temperature scale work? What does it measure?
The Celsius Network is a controlled network that gives returns on ether (ETH), bitcoin (BTC), and a number of stable coins. Even though it is set up like a bank, it seems to act more like a hedge fund than a bank.
Malinsky told us that Celsius gets all of its money from loans, so the company doesn't charge for any of its other services. But none of the services we offer, like on-ramps, swaps, or loans, cost our customers anything. In fact, almost everything we offer is free.” This means that Celsius is the only game in town.
The second part of this platform lets people borrow money by putting up their cryptocurrency as collateral. For instance, if you need USDT or USDC but don't want to sell your BTC, you can use it as collateral and get a loan from Celsius at a certain interest rate. If you don't want to sell your BTC, you can use it as collateral to borrow money from Celsius.
There are other companies that offer the same services as Celsius. CeFi is an alternative to decentralized finance (DeFi), but customers still work with a central middleman. In fact, a few of them have started working in the past few years, which is where the name CeFi comes from.
Here are the different ways Celsius gives back on its many stable coins. This, of course, led to a lot of interest, and the company has done very well in the last few years. In fact, the business raised an amazing $750 million in November 2021, bringing its total value to more than $3.25 billion.
Celsius was so successful because it always made more money than it gave to its customers. For example, if they promised a return of up to 7% on USDC deposits, this means that they plan to use the USDC deposits to make more money.
During normal business hours, there shouldn't be any trouble. When markets go down, problems that were hiding in the background become clear. This time, the markets went down. In the past few days, the value of ETH has dropped by about 50%, while the value of BTC has dropped by more than 30%.
Some of Celsius's problems were brought to light by this, which suggests that some of their positions may not be handled in the best way. This helped me understand some of Celsius's problems.
Where Did We Go Wrong?
On the other hand, technology based on the blockchain is valuable in part because anyone can use it. Some of the places Celsius lives have been of interest to the community, but things don't look good.
Their liquidation price is 26% less than what BTC is worth right now. If that price is reached and they don't put up more collateral, their entire stake, which is worth more than $500 million, will be sold on-chain at that price.
Worrisome about this situation is that Celsius has given more security instead of paying back the loan up until now. In just the last few days, this has happened many times.
A huge risk for the business of cryptocurrencies
In the not too distant future, Celsius will have a lot of cryptocurrencies. As these words are being written, their website still says that they have 151,534 BTC in assets. This number hasn't been checked, and given how unstable the market is right now, it seems very unlikely.
No matter what the number is, Celsius is one of the best lenders in the field, and if they start selling assets, it will cause a lot of trouble in the markets. Some people have thought in the past that the recent drops could be caused in part by the company selling assets.
This also brings up a long-term risk for the bitcoin industry as a whole: rules that are too strict and hard to follow. When the Terra ecosystem broke down, we already know what happened.