The collapse of another ecosystem? Celsius lending protocol in crisis

Amid the sharp devaluation of the cryptocurrency market, Celsius' lending protocol was appalled by paralyzing user choices. The team cited "unfavorable market conditions" as a justification for the measure, but did not specify it.

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The Celsius lending protocol has continued to collapse the market

The protocol carried out several transactions in Ethereo (ETH) and Wrapped Bitcoin (WBTC), and these transactions raised suspicions of possible fraud.

The problem started on the weekend, when a wave of sales started. Celsius, who uses the AAVE protocol for staking, downloaded thousands of WBTC and ETH from the protocol. The cryptocurrencies were then submitted to the FTX exchange. Transactions started on Sunday and were performed in batches. In the first batch, Celsius sent 3,500 WBTC and 50,000 ETH.

According to blockchain data, Celsius has sent over 100,000 ETHs to the FTX in recent days, as well as 9,500 WBTCs. The protocol sent smaller amounts of FTT, MATIC, UNI, USDP and TUSD. In total, Celsius moved $ 320 million.

In addition to performing atypical movements, Celsius prevented users from choosing their cryptocurrencies. The protocol announced this decision on Sunday through its official blog.

"Due to extreme market conditions, we are announcing the suspension of all withdrawals, exchanges and transfers between accounts. We are taking this step to put Celsius in a better position and, over time, meet his obligations to withdraw from the contract. "

However, the community considered this reason insufficient. And, as expected, several users began to speculate on the real reasons.

An investor known as Mike DAOdas compared Celsius' position to the Terra case. On Saturday, he claimed that some users were having difficulty withdrawing their funds, prompting Celsius CEO Alex Mashinsky to respond:

"Mike, do you even know someone who has trouble choosing from Celsius? Why spread fear and misinformation. If you get paid for it, let everyone know you're on this side. Otherwise, our task is to fight Tradfi together, "he said.

However, it took less than 24 hours and the selections were completely blocked, raising fears that the protocol was facing difficulties.

Celsius is one of the most widely used protocols for those seeking income through decentralized finance (DeFi). Therefore, it is also used by other protocols and companies, such as Tether Limited.

So a protocol crisis could cause a general problem. Shortly after the collapse of the protocol, Tether issued communique to calm the market. According to the company, the operations performed according to the protocol are re-insured, which means that they have much greater guarantees than necessary.

We will closely monitor this case and keep you informed of further developments.

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All content in this article is for informational purposes only and does not in any way serve as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.