Tech

Celsius crisis has no impact on USDT reserves

06/13/2022
Bitcoin Ethereum News

The ongoing crisis of Celsius’s native token has nothing to do with the stablecoin provider Tether and will not impact its USDT reserves, according to the company.

Tether issued a statement on Monday regarding the major cryptocurrency lending platform Celsius halting withdrawals due to its rumored liquidity crisis.

According to the statement, Tether’s lending activity with Celsius has “always been overcollateralized” as with any other borrower and “has no impact” on the company’s reserves.

The announcement also described the ongoing issues with Celsius as an “unfortunate result of market volatility and extreme market conditions.”

The Tether company is the issuer of USDT, the largest stablecoin pegged to the United States dollar based on a 1:1 ratio. At the time of writing, USDT’s market capitalization amounts to $72 billion, significantly exceeding the market value of its major competitor, the Circle-backed USD coin (USDC).

In 2021, Celsius reportedly borrowed $1 billion from Tether with Bitcoin (BTC) as collateral. Celsius founder and CEO Alex Mashinsky said that Celsius was paying an interest rate between 5% and 6%.

Tether is also known as an early investor in Celsius, contributing $10 million in equity investment to the lending platform in 2020. The latest statement from Tether stressed that the company’s investments in Celsius have nothing to do with Tether:

“While Tether’s investment portfolio does include an investment in the company, representing a minimal part of our shareholders equity, there is no correlation between this investment and our own reserves or stability.”

Celsius officially halted all withdrawals on its platform on Monday, citing “extreme market conditions” as its native CEL token lost about 50% of its value on Sunday.

Related: Nexo offers to buy out Celsius’ loans amid withdrawal suspension

The day before the collapse, Mashinsky took to Twitter to claim that rumors of users being unable to withdraw funds were “FUD and misinformation.” He also wrote that he had many enemies because he was winning.

The Bitcoin community has subsequently expressed skepticism over events at Celsius, with some industry observers suggesting that the Celsius network could “collapse and take a bunch of customer money with it.”