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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.
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 views and opinions stated by the author or any people named in this article are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading in stocks, cryptos, or other related indexes comes with a risk of financial loss.
Adarsh Singh is a true connoisseur of Defi and Blockchain technologies, who left his job at a “Big 4” multinational finance firm to pursue crypto and NFT trading full-time. He has a strong background in finance, with MBA from a prestigious B-school. He delves deep into these innovative fields, unraveling their intricacies. Uncovering hidden gems, be it coins, tokens or NFTs, is his expertise. NFTs drive deep interest for him, and his creative analysis of NFTs opens up engaging narratives. He strives to bring decentralized digital assets accessible to the masses.
