Cryptocurrency lending company Celsius on a tightrope

Celsius Network, one of the largest centralized cryptocurrency lending platforms, which may have managed up to $ 25 billion in 2021 at the time of advertising hype market, is the subject of serious concerns as to its profitability. Several concordant elements tend to demonstrate a vulnerable situation that could lead to a platform crash.

The benefit of interest-bearing crypto accounts is running out

High yield cryptocurrency savings accounts have seen a irresistible success during the flourishing phase that the market experienced in 2020/2021. Many investors were quick to do this storing their valuable assets to earn often double-digit returns. In fact, platforms such as Celsius or BlockFi, which offer simplified access to the DeFi (decentralized finance) protocol through their centralized management, have experienced a unprecedented user boom.

However, this windfall possible during a bullish expansion is unsustainable when the market falls and visibly settles for a bear market months, if not years. Also, first caution recommendation: hurry withdraw the balls from the platforms that continue to dispense interest rates unrelated to environmental gear shifting economic.

Celsius worried

The collapse of the Terra Luna ecosystem with its UST stablecoin, which generated more than 20% interest on the Anchor protocol against all odds, is probably not to be considered an isolated phenomenon. There may be other corpses not yet out of the closet, which will come to cover up the pavement even with greed and unreasonableness. And among them could be death on loan Celsius, no stranger to the disaster that resulted in billions in user losses. In fact, according to blockchain analysis, the lending platform contributed to the fall of the algorithmic stablecoin by withdrawing, at the worst moment, almost half a billion dollars of funds it had staked in the peg protocol.

A way of doing things that questions the dangerous platform practices (keeping assets on a protocol that we knew was very fragile), already stressed in the past. Therefore, in June 2021, one of its custody providers at the time, Prime Trust custodianhe had terminated his contract by citing a worrying strategy of “rehypothecation” (use for own purposes of assets deposited as collateral by customers) by Celsius.

also US regulators and its user community

The platform has not escaped the curious vigilance of US regulators either. Security officials in several states have accused her of offering non-compliant products, saying they are ready to sue. Especially Celsius, like other services of this type, has been identified in the name of consumer protection. Because, all platforms of loan without exception, they are released from all responsibility in case of problems. Enough to go around the head of the SEC who believes they behave like banks without offering the same presumed protection rate.

In fact, the user actually has no way of acting if the worst happens. Which seems to be announced a priori insolvent positions on ETH, the company that hid the loss of 35,000 ETH from its customersAnd a debt of 1.18 billion dollars in the DeFi Aave, Compound and Maker protocols.

Despite co-founder Alex Mashinsky’s denials that the company is the object of malicious intent, based on unfounded allegations, caution is a must. The Earth Moon electroshock is still recent and the question is not if there will be others, but who will crash next.

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