Tech

Celsius users share harrowing posts as withdrawal freeze extends to fourth day

06/16/2022
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Four days since Celsius Network paused withdrawals, swaps, and transfers between accounts, there remains no indication of reinstatement.

On Wednesday, it emerged the firm had hired a firm of lawyers to advise on its situation, further adding to concerns that users have lost their money.

As the situation develops, users have posted accounts of how they have been affected, and much like the stories of Terra victims, it makes for distressing reading.

The accounts of Celsius users

On Wednesday, an update from Celsius Network CEO Alex Mashinsky said the “team is working non-stop” to resolve the situation. He added that the company is focused on users’ concerns and calls for patience and support during this time.

At writing, the tweet had garnered over 1,100 replies, many of which were from anxious users desperate for more concrete news on what is happening at the lending and borrowing platform.

One user said he is in disbelief over being locked out of accessing his 28 ETH life savings. With that, he feels suicidal and isolated due to the shame of speaking to his family about what happened.

Another user said he couldn’t sleep from worrying about the years of hard work that built his 45 ETH balance with the platform. He prays that the situation will work out.

Numerous replies called Celsius to halt rewards, lessen liquidity obligations, and reinstate withdrawals. But, as one Redditor explains, doing this will likely trigger “an almighty run,” leaving the platform asset-less.

“It’s a tough situation now. If / when they open withdrawals again, there’s going to be an almighty run on the assets there, rendering the platform useless (it needs assets to operate). The owners will know this.”

What went wrong?

Analyzing the situation, the founder of the Crypto Pragmatist newsletter, Jack Niewold, did a deep dive into what went wrong for Celsius.

Niewold said the firm makes money by using users’ funds to finance other yield protocols, such as staking interest from Terra UST.

While that model is standard industry practice, Niewold claims Celsius came unstuck due to managing “their funds like degens” and taking on too much risk.

In a downturn, in conjunction with the firm’s exposure to the Terra ecosystem and stETH, liquidity at Celsius dried up, forcing them to halt withdrawals.

For now, it’s unclear whether Celsius has the assets to meet its liability obligations, which doesn’t bode well for users if not. Or whether the firm can meet its obligations, but its assets are primarily illiquid.

Niewold signed off the thread, saying this situation has further harmed the industry by bringing regulatory heat and more talking points for no-coiners to justify their position.

Source: https://cryptoslate.com/celsius-users-share-harrowing-posts-as-withdrawal-freeze-extends-to-fourth-day/