Celsius Network, one of the most popular cryptocurrency lending platforms, filed for bankruptcy this week, leaving many customers wondering what will happen to their assets.
The company’s sudden collapse has also raised questions about the future of cryptocurrency lending and whether or not it is a viable investment option.
What Is Celsius Network?
For those unfamiliar with Celsius Network, it is a platform that allows users to borrow and lend cryptocurrencies. Customers could earn interest on their deposited cryptocurrencies, which were paid out in the form of additional tokens. The company also allowed users to take out loans using their cryptocurrencies as collateral.
The company’s downfall began when it suddenly froze all customer assets due to ‘extreme market conditions.’ This led to a mass exodus of users, who quickly withdrew their funds. The company then attempted to raise additional funds through a token sale, but this was unsuccessful.
Celsius initially had $25 billion in assets under management in 2021. However, even in the most recent cryptocurrency crash in May this year, Celsius remained firm at about $11.8 billion in assets.
Unfortunately, the downturn was constant—today, Celsius is down to $167 million in managed assets. However, Celsius CEO Alex Mashinsky and his team reassured investors that the company’s remaining assets are enough to provide “ample liquidity” to support operations as the company starts its restructuring process.
“Celsius will implement a plan to maximize value for all stakeholders, which is the right decision for our company and community,” Mashinsky said in a recent statement. “We have a collective unit composed of experienced people to lead Celsius through this challenging process.”
Mashinsky further states that he and his team are confident that they will be able to turn the company around and emerge from bankruptcy stronger than before.
“When we look back at our history, we will see this period as a defining moment, where the company acted with confidence and resolve to serve the community and strengthen the future of Celsius,” Mashinsky added.
What Does This Mean To Cryptocurrency Lending?
Celsius Network’s collapse dealt a major blow to the cryptocurrency lending industry and is sure to raise questions among both Crypto enthusiasts and potential investors about the viability of this investment option.
Cryptocurrency lending has already been facing scrutiny from regulators. This latest development is likely further to increase skepticism about the viability of this investment option.
For customers of Celsius Network, the biggest concern is what will happen to their assets. The company has said that it is working on a plan to repay its customers, but news has already spread about the possibility of Celsius depositors not getting their money back.
This is a developing story, and we will provide full coverage as more information becomes available. In the meantime, customers should be cautious about investing in any cryptocurrency lending platform.
With the industry already under scrutiny, any new platform will likely face intense criticism from regulators. So before deciding to invest, be sure to do your research to ensure that the platform is legitimate and has a solid track record.
Conclusion
Celsius is a centralized platform, which was pretty much a Ponzi scheme. What happened was that they gave the impression that they took customers money to give high APRs, and in the process, bought more crypto and became overleveraged. Unfortunately, the bear market came and the market tanked, which resulted in them getting wrecked.
The recommendation is never to put your assets in a centralized platform, especially for unrealistic APR promises like Celsius’ very high 17% APR.