Four days since Celsius Network paused withdrawals, swaps, and transfers between accounts, there remains no indication of reinstatement.
On Wednesday, it emerged the firm had hired a firm of lawyers to advise on its situation, further adding to concerns that users have lost their money.
As the situation develops, users have posted accounts of how they have been affected, and much like the stories of Terra victims, it makes for distressing reading.
The accounts of Celsius users
On Wednesday, an update from Celsius Network CEO Alex Mashinsky said the “team is working non-stop” to resolve the situation. He added that the company is focused on users’ concerns and calls for patience and support during this time.
@CelsiusNetwork team is working non-stop. We’re focused on your concerns and thankful to have heard from so many. To see you come together is a clear sign our community is the strongest in the world. This is a difficult moment; your patience and support mean the world to us.
— Alex Mashinsky (@Mashinsky) June 15, 2022
At writing, the tweet had garnered over 1,100 replies, many of which were from anxious users desperate for more concrete news on what is happening at the lending and borrowing platform.
One user said he is in disbelief over being locked out of accessing his 28 ETH life savings. With that, he feels suicidal and isolated due to the shame of speaking to his family about what happened.
Can't believe in this…my life savings were there…28 eth
i AM going to kill my self….Can't tell this to my family…. I want to desapear from this world….
— Filipe (@Philip_hodl) June 15, 2022
Another user said he couldn’t sleep from worrying about the years of hard work that built his 45 ETH balance with the platform. He prays that the situation will work out.
Please don't let me down I don't mind waiting for my either I had 45 ETH which I was saving for my new house I'm crying and praying to God that I will be able to get that money out. It took 4 years and me working 100 hours every week to save
Can't sleep
— Henry (@Henry69242220) June 15, 2022
Numerous replies called Celsius to halt rewards, lessen liquidity obligations, and reinstate withdrawals. But, as one Redditor explains, doing this will likely trigger “an almighty run,” leaving the platform asset-less.
“It’s a tough situation now. If / when they open withdrawals again, there’s going to be an almighty run on the assets there, rendering the platform useless (it needs assets to operate). The owners will know this.”
What went wrong?
Analyzing the situation, the founder of the Crypto Pragmatist newsletter, Jack Niewold, did a deep dive into what went wrong for Celsius.
Niewold said the firm makes money by using users’ funds to finance other yield protocols, such as staking interest from Terra UST.
1. Originating loans to institutions and individuals
2. Keeping whatever profits are left after running strategies on behalf of their customers
So if they advertise 5% on USDC deposits, then swap that $USDC to make 20% on $UST, they can keep 15%.
— Jack Niewold 🫡 (@JackNiewold) June 13, 2022
While that model is standard industry practice, Niewold claims Celsius came unstuck due to managing “their funds like degens” and taking on too much risk.
In a downturn, in conjunction with the firm’s exposure to the Terra ecosystem and stETH, liquidity at Celsius dried up, forcing them to halt withdrawals.
For now, it’s unclear whether Celsius has the assets to meet its liability obligations, which doesn’t bode well for users if not. Or whether the firm can meet its obligations, but its assets are primarily illiquid.
Niewold signed off the thread, saying this situation has further harmed the industry by bringing regulatory heat and more talking points for no-coiners to justify their position.
Markets are obviously shaken by the news, and these big institutions are becoming forced sellers: it's not a good sign.
As always, this invites regulation, oversight, and legal action from governments, institutions, and critics.
A dark day in crypto for sure.
Stay safe.
— Jack Niewold 🫡 (@JackNiewold) June 13, 2022
The post Celsius users share harrowing posts as withdrawal freeze extends to fourth day appeared first on CryptoSlate.
