Home Understand the current Celsius problem and investor anger.

Understand the current Celsius problem and investor anger.

6 min read

Celsius Network is one of the giants in the field of crypto lending platforms. Crypto lending is a way to generate interest on your capital easily. Lending means "loan" in English. Thus, the concept consists of lending your cryptos and receiving in exchange the reimbursement with interest.

Celsius Network is one of the best-known and most widely used crypto lending platforms among crypto holders. Celsius Network LLC is based in New Jersey and holds over $11 billion in crypto assets, according to company information.

However, in recent days, Celsius has been hit by a storm . Yes, is 2022 proving to be a difficult year for cryptocurrencies?

Withdrawals, transfers and swaps are – for the moment – suspended. Obviously, this irritates the community to the highest degree.

Anger is rising and you will discover in this article the “reasons” for the anger.

The origin of the problems encountered by Celsius

Since the beginning of the year, the market has been under downward pressure. Bitcoin has fallen below $30,000, and the market has experienced historic crashes, notably the demise of Luna . In this dramatic situation, some panicked clients are withdrawing their funds. This is also what happened with Celsius Network clients.

Presumably, tensions on Celsius Network began with the fall of UST and Luna. Some clients who had deposited UST and Luna then lost their investments.

It's important to know that many lending platforms "lost" money with Luna. However, most managed to liquidate their positions before the major crash. Others simply reimbursed their clients.

However, the problems instead began with the loss of the value of the CEL token.

The fall of the CEL token

Celsius issued its own token: the CEL. Since last month, the token has followed the bearish pressure of other altcoins. The CEL experienced a drop of more than 50% in its value. The most terrifying thing remains the fact that the token has lost 90% of its value compared to its peak last June.

For Celsius, management asked certain people who had borrowed (and deposited CEL tokens as collateral), to sell their CEL tokens if they were unable to deposit more CEL. This is a normal mechanism on lending platforms. So it's completely normal, somewhere.

However, the injunction to sell CEL tokens at such low prices turns out to be scandalous for many people. They have clearly lost a lot of money, that’s undeniable.

Investors complain that Celsius pushed them to buy these tokens (in particular to have higher interest rates). So, they complain about not having been able to sell their tokens at the right time. The market was not liquid at that time. They then had to get rid of their CEL tokens when they were no longer worth anything.

A disaster for many wallets therefore. See some investor comments in the screenshots below:

For these investors, it was Celsius’ duty to support the currency. Which they didn't do. The criticism of Celsius is essentially linked to the fact that Celsius did not know how to manage the crisis of the collapse of the UST.

Celsius, a company that will go out of business?

In fact, for the oldest, this story inevitably reminds us of the CRED affair. Cred was also a very well-known lending company a few years ago. It was even the number 1 platform before going bankrupt.

That said, Cred appears to have failed due to poor cash management. Similarly, it seems the founder partnered with a notorious fraudster. (You can read the article about Cred to find out what really happened).

Yes, yes, in the ruthless world of crypto, scammers, bullshitters and other impostors are legion, I'm not kidding you.

So, it is really too early to decide for Celsius...The problems are not of the same order (as far as we know.

The answers provided by Celsius

As with every crisis faced by a platform, the first way to defend itself is to invoke conspiracy theories. For example, the CEO of Celsius (Alex Mashinsky) stated that certain individuals ( CEL whales ) are trying to bring the company down.

In fact, it's also worth remembering that the US government is closely monitoring Celsius and other crypto lending platforms. We recall that BlockFi (a competitor of Celsius) had to pay over $100 million to the SEC.

If Celsius were to pay such a fine, the company stated that it would be able to do so. Understandably, the company has no cash flow problems. Furthermore, the company reportedly also owns a Bitcoin mining subsidiary . (This will be made public shortly, according to the company).

Will this be enough to overcome the loss of investor confidence? Nothing is less certain.

Should we be worried about crypto lending platforms?

Frankly, whether it is lending on decentralized finance or on CeFi platforms, the risks are there. No matter what you want to do with your cryptos, if there is a return, there is a risk.

Cryptos are very volatile assets, as you know (and should know). This means that any actions you take with it will be subject to greater risk of loss.

Of course, when the markets are on the rise, everything is fine 😉 All the tokens increase in value and we tend to believe that we have found the goose that lays the golden eggs.

Stop fantasizing for too long. I'm going to give you a little advice that I already gave in a video on the 5 best crypto lending platforms on Youtube;

Our advice for optimizing your earnings with lending

The advice was to spread your investments across different platforms. Personally, I lend on DeFi as well as on CeFi. And, I use at least 4 platforms. I deposited BTC on Celsius (and nothing else) so I'm not worried that much.

I also use other platforms like Youhodler or Nexo.

The other piece of advice we give you in the video is something that not many people will tell you. Try to avoid platforms that have their own tokens. In fact, by creating their tokens, platforms add additional risk of loss. You really need to be aware of this. This can be profitable in a bull market but when the market goes down, it becomes really dangerous for the platform.

In general, you are not advised to follow this advice because there are very few people who have in-depth knowledge of the mechanics of token creation.

Take this advice and do your own research as always.

Also be careful of platforms that are only intermediaries. They take commission from your winnings and only serve as intermediaries. Lending platforms are easy to use, you can do it yourself like a grown-up.

Here is the video to find out more.

#lending #zonebitcoin #lendingcrypto

You can also read the written version of the article: Top 5 best lending platforms.

Note: No financial advice is given in this or any other article on zonebitcoin. This is information of which you are the sole judge and master. Be responsible with your investments and only invest as much as you are willing to lose.

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