Celsius shared a memorandum with its users and community members on June 13. The announcement carried the team’s decision to put off all the operations like deposits, withdrawals, and transfers to fortify its management framework. The team hopes to bring the project to a better position that would benefit the users.
Celsius is a DeFi lending platform with 17 million customers worldwide and offers its services through an easy-to-access free mobile app. As one of the giantly lending platforms, Celsius was valued above $3.25 billion last year, and its native CEL token held firmly onto a bullish value above $7.
However, testing times in DeFi have brought the value of these tokens to around $3 by last April. But to make it even worse, the CEL tokens are traded for around 20 cents in the market and have lost around 92% of their value since April.
Experts have soon raised questions about the network’s yields, reserves, and connections with the recently fallen Terra stablecoin. Whatever the reason, the value of the assets on the platform dropped from $24 billion last December to half as much in May. Reportedly, the platform vented about a billion dollars between March and May alone.
After reassuring the users of Celsius about the reserves and ETH holdings on June 7, the lending platform has taken a deep turn by deciding to halt all the operations related to swaps, transfers, and deposits between accounts. The official memorandum called out “the extreme market conditions” for this recent ceasefire.
The operations on Celsius are similar to what a bank does with an obvious difference called cryptocurrencies. The platform takes deposits and lends out to earn interest, of which a portion will be offered to the investors. But, unlike a bank, Celsius has no FDIC Government Insurance or other failsafe measures to withstand financial difficulties or failures.
For this reason, many skeptics have already stated that Celsius is moving toward failure, and some went even further, calling the platform a Ponzi Scheme. Now, the announcement to halt the operations indefinitely has caused waves of fear among those who put their holdings on Celsius.
Nonetheless, Celsius assured users that the holdings on the platform would continue to earn interest as long as the pause is. As per the report, the team will work on liquidity stabilization and the management of the framework before restoring withdrawals, swaps, and transfers.
The demand for high-yield lending platforms has been hit since Terra UST and LUNA went down a month ago. And what’s more, the ripples caused by Terra’s fall have wiped off more than $100 billion TVL from the crypto market and left platforms like Celsius to struggle.