Celsius Network, the retail crypto lending platform whose liquidity problems have sent cryptocurrencies plunging, stumbled on complex investments in the wholesale digital asset market in what analysts say was akin to a traditional bank run.
Celsius appears to have stumbled on its wholesale crypto investments, according to public blockchain information and analysts who track such data. As those investments soured, the company was unable to meet redemptions from customers fleeing amid the broader crypto market slump, analysts said. Celsius' problems date back to at least December when, at the hands of hackers, it lost $54 million worth of bitcoin it had invested with DeFi platform BadgerDao, according to public blockchain data. At the time, Mashinsky said Celsius lost money, but did not disclose how much.
The company's biggest misstep, though, appears to have been its decision to invest customers' ether tokens with Lido Finance, a DeFi platform offering investors the chance to profit from a new version of ether that is in development. The investments are known as"staked" ether, or stETH. That discrepancy will have made it difficult for Celsius to convert its stETH back to ether to meet customer withdrawals, said analysts.The slump in bitcoin, which has shed about half its value this year, has also pressured Celsius. It pledged crypto assets pegged to bitcoin as collateral against a loan of other cryptocurrencies, according to Thurman. As bitcoin fell, Celsius had to top up that collateral, said Thurman.
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