Oh, dear. It feels like only yesterday I was writing a deep dive on the Luna/UST death spiral which sent the cryptocurrency markets into meltdown – Bitcoin tumbling from $40,000 to $30,000 and an entire ecosystem vanishing.
I woke up this morning to see Bitcoin trading at $23,500, as the lending platform Celsius announced it was suspending all withdrawals and transfers. Mondays are tough enough already – come on. But I guess another death spiral deep dive is in order.
.@CelsiusNetwork is pausing all withdrawals, Swap, and transfers between accounts. Acting in the interest of our community is our top priority. Our operations continue and we will continue to share information with the community. More here: https://t.co/CvjORUICs2
— Celsius (@CelsiusNetwork) June 13, 2022
What does this mean?
Before getting our hands dirty, let me quickly explain what Celsius is in simple terms, for those unaware. It functions similarly to a bank – but a very aggressive bank (I grew up in Ireland and lived through our banking crisis of 2008, so I’m unfortunately have seen echoes of this before!).
Customers deposit their crypto into Celsius (Bitcoin, Ethereum, whatever), and the platform lends out this crypto to borrowers. Therefore, the customer is handing over their crypto to Celsius, who in turn lend it out, like a bank. Celsius pays depositors a yield, which is the motive for customers to deposit their crypto with Celsius. This yield is dynamic and varies from time-to-time. I pulled the latest rates on Bitcoin, for example, off the Celsius website and pasted below. Bitcoin is just an example – there is the option for depositors to earn a yield on all sorts of various cryptocurrencies
