Celsius network pauses all transactions between accounts, citing market volatility and extreme conditions. At present, users cannot withdraw, swap or transfer their crypto between different accounts. The reason that the company gave for this was to protect investors and put Celsius in a better position to honor its withdrawal obligations in the future.
Why did the network take this step?
In a memo to the community, the Celsius team said that by halting transactions, they would be able to stabilize liquidity and operations. During this phase, they will take the necessary steps to protect and preserve assets. Users will continue to earn rewards during this paused transaction period as well. It seems one of the primary reasons for the market uncertainty was the market crash of UST.
The crash has created this perception that all-staking yield coins are shady. So, investors are overly cautious and doubtful about such protocols leading to more withdrawals. Celsius is one of them and is facing a tough time right now. Their native token, CEL, gives insanely high returns and even up to 30% weekly extra returns. Whether that’s sustainable or not is a discussion for another day, but the users’ skepticism is justified.
In fact, it is not just Celsius; other similar protocols like Comp, Aave, and Maple are also down 9%, 7.5%, and 14% in the past few weeks. This, alongside the selling pressure of Bitcoin and Ethereum, is creating a very stingy market right now.
About Celsius network
Celsius Network is a blockchain-based financial network that gives access to financial services unavailable through traditional institutions. Some of its services are lending, yield creation, and payment solutions. The Celsius mission is straightforward: to ensure financial services while prioritizing the community over intermediaries.
Celsius claims to give back 80% of its profits to its users in the form of awards and competitive savings rates. However, how can Celsius afford to do so? The key is over-collateralization of crypto loans and rehypothecation, which is a process in which crypto money held as collateral on the Celsius Network is lent to a third party — in this case, institutional investors searching for dependable bitcoin inroads.
What are your thoughts as the Celsius network pauses all transactions amidst market volatility? And do you think this move is justifiable for any reason? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.
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