In June 2022, Bitcoin is projected to experience a market-wide crypto crash. Following the severe market drop last month, cryptocurrency lender Celsius -a billion-dollar cryptocurrency corporation, officially declared bankruptcy.
What’s The Celsius Network?
Celsius Network LLC is a bitcoin loan provider. With its headquarters office in Hoboken, New Jersey, Celsius has operations all around the world.
Users can take out loans using their cryptocurrencies as collateral by depositing a variety of digital assets, including BTC and ETH, into a Celsius wallet to earn a yield in percentages. The corporation had lent $8 billion to customers as of May 2022 and was managing assets worth close to $12 billion.
In 2017, Alex Mashinsky, Daniel Leon, and Nuke Goldstein established Celsius Network.
When the company indefinitely suspended all transfers and withdrawals in June 2022 owing to extreme market conditions brought on by the sharp reduction in the value of Bitcoin and other cryptocurrencies, the company became well-known.
Celsius formally filed for Chapter 11 bankruptcy on July 13, 2022.
Celsius enabled lending activities for its consumers until freezing withdrawals in June 2022. On up to one bitcoin, depositors received a 6.2 percent interest rate. Loans backed by bitcoin carried interest rates ranging from 0% to 8.95%, based on the loan-to-value ratio.
Hedge firms that we’re searching for better payouts than banks offered some of the funds that Celsius used to finance the loans. Customers of Celsius receive up to 17 percent back on cryptocurrency deposits.
The company uses cryptocurrencies, including its own CEL coin, to pay interest in kind.
The value of the assets put on Celsius’ platform has decreased by 50% year to date, according to some reports published in May. The month before Luna’s brief loss of its dollar peg, Celsius cut in half the amount of the stablecoin it borrowed.
What’s The Case Actually?
The crypto crash, which destroyed over $400 billion from the cryptocurrency market, caused the Celsius cryptocurrency CEL to lose close to 80% of its value.
The recent collapse in Bitcoin and other cryptocurrency values has stressed the limits of Celsius’ economic strategy.
The business originally advertised itself as less hazardous than banks and offering greater returns to its clients.
However, Celsius offered depositors of cryptocurrencies exorbitant returns and extended huge loans backed by scant security.
The board of directors for Celsius stated that halting withdrawals was a difficult but necessary step and that without a pause, the momentum of transactions would have permitted definite clients who were first to function to be fully paid whilst also having left everyone else behind to stand in line for Celsius to reap valuation from unhedged or lengthier investments before they obtain a recovery.
The halt in withdrawals and the fluctuations in the market gave a blatant indication that the company might be experiencing serious and serious financial issues.
Questions about the sustainability of future operations were also raised as a result of the few public communications following the suspension of withdrawals.
Accounts will stay sealed until Celsius has reorganized, and according to reports, the company has $167 million in cash on hand to support “some operations” during bankruptcy.
Investors in cryptocurrencies could be worried about a possible contagion extending to other platforms, much like the kind of massive withdrawals that often take place during bank runs.
According to experts, crypto markets are being severely impacted by fear and uncertainty, a lack of liquidity, and U.S. inflation figures.