At the beginning of this week, crypto lender Celsius faced problems. Client assets were frozen due to liquidity issues, but the company is said to be in talks with investors for additional capital. But Celsius investors wouldn’t be so sure anymore.
Celsius bailout is not going well
That writes The Wall Street Journal based on own information. At least two investors are according to the businessrant unwilling to put more money into Celsius, more precisely the large Canadian pension fund Caisse de dépôt et placement du Québec and a private equity fund WestCap Group. The latter company belongs to Laurence Tosi, a former Chief Financial Officer of Airbnb. Both companies participated in a Celsius investment round last year, raising approximately US$750 million.
†Few are comfortable with the situation,” said one familiar with the negotiations between Celsius and its investors. Many investors would find the proposal too risky.
crypto bank run
At the same time explains Shark Tank celebrity Kevin O’Leary to CoinDesk that we haven’t hit the bottom in crypto yet, and that Celsius is most likely going to go to zero. “Celsius is too much to blame. The funds are now frozen. As a result, every participant on the platform wants to remove their tokens from the platform as soon as possible. It’s a self-reinforcing problem, and Celsius is going to zero,” he explains.
Celsius is basically just a bank. It collects customers’ deposits and invests them in the ‘wholesale crypto market’, according to Reuters† Because Celsius often promises its customers huge interest rates, the pressure for Celsius to realize a return on its investments is also enormous. Last October, Celsius stated it had $25 billion under management. In May this was only USD 11.8 billion.
So the situation at Celsius is actually a kind of bank run† The original purpose of crypto was to circumvent the risk surrounding the banking system. If Celsius does not get a bailout, it will have to sell its assets to meet the demands of its investors. It is also possible that users of the platform get (part of) their funds back. In any case, it will probably cause more red prices for cryptocurrencies.
