Is Celsius Token Dead?

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Contributor, Benzinga
June 21, 2022

After the crash of Terra (Luna), an already rattled cryptocurrency market is seeing yet another massive industry player fall to pieces: Celsius.

Celsius is a crypto lender and an important participant in the world of decentralized finance (DeFi). Celsius announced in a brief blogpost on late Sunday that it was pausing withdrawals, swaps and transfers for its customers.

This move sent the crypto market into a state of panic because billions of dollars across the globe were now frozen. Crypto Twitter started fueling the fire that Celsius might be insolvent. Prominent crypto YouTuber Ben Armstrong is among millions of users affected by this move and took to Twitter to express his concerns.

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Why is Celsius Token Down?

Celsius token's dramatic plummet has been exacerbated by several things occurring almost simultaneously in traditional and DeFi markets.

U.S. inflation data from the spring of 2022 showed the largest increase in inflation since 1981. The Consumer Price Index (CPI) hit a year over year high of 8.6%. This spike sent fear through the market as a whole and caused many investors to continue de-risking out of stocks and crypto and into cash and government bonds.

Coupled with worse-than-expected inflation numbers, cryptocurrency investors have already been shaken by the recent collapse of UST and Terra (Luna) in May.

The world's largest stablecoin, USDT, has also recently seen increased volatility against the U.S. dollar. Investors worried about another UST-like collapse have been dumping USDT over the past month.

On top of copious amounts of fear in the market brought about by inflation, the experience with Luna and the collapse of crypto in general, on June 13, 2022, Bitcoin crashed 14% after cryptocurrency lender Celsius froze withdrawals and transfers, citing extreme conditions. 

Freezing customer withdrawals and transfers does not come across as transparent, and Twitter users slammed the Celsius team for its decision and lack of disclosure of the company’s assets versus liabilities.

To dive a bit deeper, the announcement to their community states that Tether took this action to "stabilize liquidity and operations while we take steps to preserve and protect assets."

"We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations," the company said.

Celsius claimed it was freezing these actions on its platform to protect assets but still allowed its users to take out loans.

What many do not realize is that since Celsius and other crypto lending platforms are in a gray area of regulation, Celsius and other similar companies are not required to disclose their assets to the public.

The U.S. Securities and Exchange Commission (SEC) has been slow to issue regulations, causing problems for retail investors.

Celsius Networks (CEL) Price Movements

The Celsius token, which is used for earning interest on tokens deposited on the platform, had fallen about 97% in the 12 months leading into June of 2022, from $7 to around 20 cents.

The decision to freeze customer accounts triggered an even greater sell-off across cryptocurrencies, with the total crypto market capitalization dropping below $1 trillion for the first time since January 2021.

As of September of 2022, Celsius was sitting around $1.50, falling back to Earth after it reached more than $3 in mid-August of 2022.

Is Nexo Going to Acquire Celsius?

Celsius Network's rival crypto lending firm, Nexo, reached out to its counterpart after the news broke to offer to purchase whatever Celsius had left in assets and acquire their loans receivable.

Nexo claimed in its Twitter statement that its firm was in а solid liquidity and equity position to acquire remaining assets held by Celsius. 

Nexo's letter of intent to Celsius stated that Nexo's “partners and affiliates could readily acquire from Celsius part or all qualifying, outstanding collateralized loan receivables secured by their corresponding pledged cryptocurrency collateral, subject to Nexo’s risk management and collateral requirements.”

Nexo claimed to have completely de-risked its DeFi exposure at this point and has the adequate liquidity to easily make this acquisition possible. As of September of 2022, no further information on the acquisition was available.

Where to Buy Celsius (CEL)

Although Celsius Network's token has an uncertain future, Celsius can be purchased on some of the biggest exchanges worldwide like FTX and Huobi Global.

Getting on board one of these exchanges is not difficult and requires basic Know Your Customer processes like submitting a picture of your driver's license.

If you want to purchase Celsius somewhere other than a centralized exchange, it can also be found on Uniswap.

Cryptocurrency Market Cycle

Historically, one way the cryptocurrency market is measured is by comparing the price action of Bitcoin to the altcoin market. If the altcoin market is "mooning" and other tokens are outperforming Bitcoin, then it is deemed altcoin season. 

It is not altcoin season currently, and Bitcoin and the altcoin market are dropping together. While depreciating over 50%, Bitcoin is still outperforming almost all other major tokens at this time.

Bitcoin's historical dominance in the crypto market does not mean that its smaller counterparts can not take the stage for some serious gains. Although an alt season like this has happened in the past, it does not look like the Bitcoin or altcoin market will experience a leg up for some time.

So, is Celsius Token Dead?

If you live by the adage "don't try to catch a falling knife," it would be unwise to enter a Celsius position at this point. 

The crypto market is currently in a state of freefall, and if you attempt to catch it, you might get cut. Furthermore, if Celsius proves to be insolvent in the coming weeks and fails to honor outstanding loans, it is highly possible at that point that the Celsius token is dead. 

Disclosure: ²Sum of median estimated savings and rewards earned, per user in 2021 across multiple Coinbase programs (excluding sweepstakes). This amount includes fee waivers from Coinbase One (excluding the subscription cost), rewards from Coinbase Card, and staking rewards. ³Crypto rewards is an optional Coinbase offer. Upon purchase of USDC, you will be automatically opted in to rewards. If you’d like to opt out or learn more about rewards, you can click here. The rewards rate is subject to change and can vary by region. Customers will be able to see the latest applicable rates directly within their accounts

Frequently Asked Questions

Q

Is Celsius valued at $0?

A

No, Celsius is not valued at $0, but it is in danger of losing any value it might have retained after the crypto crash of 2022.

Q

Can you make money with Celsius?

A

Yes, you can make money trading Celsius, but you need to research your investments and monitor the markets carefully.

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