Pain.

GM, and welcome to RollCall by Rollfi! 

Get caught up from the past week in 10 minutes or less:

• What happened to Celsius 🤔

• Tether scares investors 📉

• More stuff from the week 📰

What happened to Celsius

Crypto lending platform Celsius Network paused withdrawals, swaps, and inter-account transfers last week in an effort to prevent insolvency. And as of writing today, the pause is still in effect. So what happened and how did this happen?

The way Celsius works is that people deposit their crypto on the platform and Celsius goes and earns a return by lending the crypto out to high-net-worth individuals and businesses, and investing in different protocols.

Unfortunately, Celsius did not seem ready for this bear market. The lender had a large position of staked Ether in Lido.  Lido provides liquidity to those who want to stake their Ether on the upcoming PoS Ethereum blockchain by swapping ETH with their supposed 1:1 pegged version staked ETH or stETH. 

Following the LUNA crash, the Celsius platform saw weekly withdrawals outweighing deposits on the platform, meaning the total value of assets they managed was decreasing. So with a supposed 1M in ETH liabilities and only 268k ETH readily available for withdrawal by customers and assets quickly decreasing you can see why they had to pause withdrawals. It isn't as if Celsius lost the ETH altogether though, it is simply locked away until after The Merge.  Twitter user yieldchad breaks down their ETH holdings here:

Celsius could sell their stETH but it has de-pegged from ETH at about a .94:1 ratio as of writing this, so Celsius would take a loss, and that does not account for the further sell pressure that would have on stETH.

So what now for Celsius after 7 days of paused withdrawals on the platform? Well, a Medium post by the company yesterday seems to indicate that there is not an end in sight for the pause, and users could end up waiting a long time to be able to withdraw again. 

Tether scares investors

After the Luna crash, investors have become wary of stablecoins, Tether included.  Tether temporarily de-pegged from the dollar in early May which came after months of investors questioning the validity of the reserves of the stablecoin.

Now, in the last week, investors have pulled over $1.6 billion out of the cryptocurrency amid fears of the continuing bear market. The Tether team stands that its stablecoin is fully backed with just under $70B in assets and a $165M shareholder cushion, and has been able to withdraw their deposits in Celsius prior to the pause.

The stablecoin market is something we'll be paying close attention to as the bear market continues, as it is a clear indication of what investors believe about certain projects. And if the legislation proposed a few weeks ago by Sen. Cynthia Lummis passes, stablecoins will be required to maintain fully backed reserves.

More stuff from the week

• BTC and ETH continue to tumble past previous cycle highs

• Crypto companies Coinbase, BlockFi, and Crypto.com have announced layoffs including Coinbase laying off 18% of staff.

• Elon Musk, Tesla, and SpaceX are being sued for $258 Billion for an alleged Dogecoin pyramid scheme.

Glossary

We're confused too, that's why we're here to help decrypt the crazy world of crypto.

• insolvency - a term for when an individual or company can no longer meet their financial obligations to lenders as debts become due (Investopedia)

• staked Ether (or stETH) - an asset provided to investors who stake ETH on Lido that is tied to the price of ETH and provides liquidity to those stakers

• liquidity -  the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price (Investopedia)

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Disclaimer: Rollfi Inc does not guarantee and is in no way responsible for the accuracy of information provided in this message. All information is provided “AS IS” and with all faults. Data presented here may not reflect all activity in the market.