Rumors that Celsius is experiencing a major liquidity crisis have reached a tipping point this weekend as management announced it was pausing all withdrawals, swap, and transfers between accounts.
Celsius sought to soften the blow, ensuring customers that they would continue to accrue rewards and that the suspension was temporary, but the announcement sent shock waves across the crypto community.
According to Celsius, the decision was made due to “extreme market conditions” disrupting liquidity and operations. It came as crypto was closing a nightmare weekend, which saw BTC drop 6% to less than $27,500 and ETC revisit $1,200, a price it last sold for in January 2021.
Domino effect
But trouble at Celsius didn't start on Friday. Earlier this month, crypto sleuths began dropping clues that a crisis could be imminent as on-chain data showed that the lending platform itself had borrowed approximately $95 million worth of crypto to cover withdrawals.
According to Twitter account Dirty Bubble Media, companies with high exposure to Celsius include Voyager and Nuri, which invested customers’ funds in Celsius, as well as crypto exchange Gemini and USDT stablecoin issuer, Tether.
Monday morning, Tether issued a statement admitting that Celsius is indeed part of Tether’s portfolio, “representing a minimal part of our shareholders equity,” but that liquidity issues on Celsius have no impact on Tether’s reserves.
Voyager tweeted that all of its services are operational and remain unaffected.
As of this writing, neither Nuri nor Gemini have addressed the rumors.
Suspicious transactions
To manage the crisis, Celsius has allegedly unstaked $247 million worth of wBTC and sent it from AAVE to the FTX exchange. As much as 54,749 ETH, worth about $74.5 million at the time the transaction reportedly took place (as of this writing, it would be worth $67.5 million), was also transferred to FTX.
The motives behind those transactions are not immediately clear.
The developments led some Celsius users to panic, with still-fresh memories of the collapse of Terra and the steep losses on Bitcoin and Ethereum adding to the fear. As a result, the Celsius token plunged 51% in the last 24 hours. Trading volume went up 63%.
