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Celsius Network: The Rise & Fall of This P2P Lending Network

Celsius Network is a peer-to-peer lending network that works on a centralized exchange, and the CEL token is the native token of the platform.

P2P exchanges are responsible for managing bank accounts that receive and make payments for crypto trades from individual investors who must comply with regulatory requirements.

When purchasing crypto on a P2P exchange, users send the agreed price to the seller’s account from their account. To the bank, this payment is just a regular transaction between two individual customers, not between a customer and a money services business.

What is Celsius Network

A centralized exchange like Celsius must register as a financial services business in its jurisdiction and apply for a bank account. When applying for the bank accounts, the company behind the exchange has to disclose the nature of its business. 

It allows financial institutions to decide if they are legally permitted to facilitate crypto transactions. In many countries, banks follow regulatory instructions and refuse to open bank accounts for crypto exchanges.

Why Did the Celsius Network Pause Withdrawals

Celsius Network has paused withdrawals to stabilize liquidity and minimize the damage affecting the token. However, investors have accused the network of transferring liquidity to the FTX exchange before announcing the withdrawal pause, leading to scrutiny. 

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More information about the allegations against the top-level management of Celsius Network can be found at the provided link.

Celsius Network is a large centralized gateway to cryptocurrencies. It has raised $864 million in venture capital and has held over $3 billion worth of cryptocurrency funds for its 1.7 million and growing user base. 

The network offers a “do it all” fintech app that allows users to trade cryptocurrencies, earn high-yield deposits on stablecoins and cryptos, and participate in crypto-backed lending.

What is a CEL Token?

CEL token is Celsius’ native token, and the whitepaper is available on its website. Trading CEL tokens can be profitable because it offers rewards, discounts, and points for using Celsius’ services.

The Fall of Celsius

Despite its accomplishments, Celsius Network appears to be insolvent and unable to pay the debts it owes. The network’s high yield on crypto deposit offerings is unsustainable and has become a victim of its own promises. That led to scrutiny of its work module and led to underperformance.

Celsius’ safety and security measures were called into question when it paused withdrawals for users, which goes against its safety and security policies. The network’s dependence on MakerDAO’s permissionless on-chain money markets also contributed to its downfall. 

Celsius had a nine-figure loan with MakerDAO, which didn’t work out for them. Twitter user ‘Jonwu.Aztec’ has provided an in-depth analysis of Celsius and MakerDAO’s lending protocol. Refer to the Twitter thread for more information.

Summary

The Celsius Network appears to be insolvent and unable to pay its debts due to an unsustainable high yield on crypto deposits. It has led to scrutiny of its work module and underperformance.

Disclaimer

The contents of this page are intended for general informational purposes and do not constitute financial, investment, or any other form of advice. Investing in or trading crypto assets carries the risk of financial loss. The forecasted data (also called “price prediction”) on this page are subject to change without notice and are not guaranteed to be accurate.

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Nancy J. Allen
Nancy J. Allen
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and a minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.