Crypto lending and trading platform Celsius, which is reportedly facing insolvency, has been impacted by ongoing crypto industry instability which has forced companies to cut their workforces and even led to the closure of some companies. Celsius paused withdrawals for its 1.7 million users earlier this month, prompting concerns over its financial stability. The company was founded in 2017 by Daniel Leon, Nuke Goldstein, and Alex Mashinsky, and raised $50m from an initial coin offering. Celsius has since raised an additional $810m, with $750m of that in an expanded funding round that involved Canada’s second-largest government pension fund.
The Crypto Collapse and the Impact on Crypto Companies
As the crypto market continues its downward trend, many companies in the crypto industry are feeling the effects. Several crypto companies have already gone under, while others have been forced to cut their workforces. One such company that is speculated to be on the brink of collapse is Celsius.
Background on Celsius
Celsius, also known as Celsius Network, is a centralized platform for crypto lending, borrowing, saving, and trading. It was founded in 2017 by Daniel Leon, Nuke Goldstein, and Alex Mashinsky. Mashinsky, who is the CEO of Celsius, has been the face of the company. Celsius got its start through an initial coin offering (ICO) conducted in early 2018, which brought in roughly $50 million.
How Celsius Earned Interest on User Assets
Celsius was known for offering incredibly high interest rates on the cryptocurrencies it supported. This was made possible through lending users’ crypto to institutions, depositing it into D5 protocols, and using it for staking and mining. The platform would keep the difference between the interest rates earned and the ones promised to users. Additionally, Celsius would pay out interest to users every Monday and use a portion of the interest to buy back and burn the sell token, causing its price to rise.
Celsius’s Troubles Begin
Celsius’s troubles began in July of 2021 when stakehound lost access to the keys to its Ethereum wallet, resulting in $74 million of Ethereum being locked on-chain. On-chain analysis by Nansen suggests that most of this Ethereum belonged to Celsius. The platform’s exponential growth and high interest rates also attracted the attention of regulators in the United States.
Things only got worse when Celsius’s CFO was arrested in November of 2021 in connection with an alleged crypto money laundering scheme in Israel. In December of 2021, D5 protocol Badger DAO was exploited for $120 million, $51 million of which was in the form of wrapped BTC believed to have belonged to Celsius.
Celsius’s Current Situation
Celsius appears to be on the brink of collapse with hundreds of millions of dollars of outflows as retail investors flee to greener pastures or cash out completely. The value of the crypto held by Celsius has collapsed along with the rest of the crypto market. The platform’s about us page states that Celsius held just under $12 billion in crypto in May of 2021, which appears to be the last time this figure was updated.
What It Means for the Cell Token
The future of the sell token remains unclear. Sell tokens were sold during the ICO, and the platform’s success has been tied to the health of the token. However, the collapse of Celsius may lead to the collapse of the sell token as well.