Celsius

Maker cuts off Aave’s Dai supply as fallout from Celsius continues

The MakerDAO decided to cut off Aave from its direct deposit module as a safeguard in light of the possibility that Celsius folds and crashes the price of stETH.

MakerDAO has voted to cut off lending platform Aave’s ability to generate Dai for its lending pool without collateral as the risks of Celsius’s liquidity crisis loom large over the entire crypto ecosystem.

The decentralized autonomous organization (DAO) made the decision as a means of mitigating the Maker protocol’s exposure to the beleaguered staking and lending platform in case Celsius goes belly up and implodes the staked Ether (stETH) peg as well.

stETH is a token representing an amount of ETH that is staked on the Lido staking platform. Its peg to Ether (ETH) has been wavering for several weeks, and it’s currently trading about 6% below the price of ETH. Celsius invested a significant amount of user funds into stETH, which is reportedly one of the reasons it paused withdrawals.

A Tuesday governance proposal from DAO member prose11 suggested that the Maker protocol should temporarily disable the DAI Direct Deposit Module (D3M) for Aave because Celsius borrowed 100 million in Dai collateralized by stETH, which would be at risk of liquidation if Celsius fails:

“The reason we believe this is risky is because out of 200M DAI borrowed on Aave Ethereum v2, 100M DAI is being borrowed by Celsius and collateralized mostly by stETH.”

The D3M allows Aave to stabilize the Dai loan interest rates by providing access to liquidity when needed. Aave’s D3M consists of 200 million Dai, 100 million of which have been borrowed by Celsius.

If Celsius does collapse, it might sell off its stETH to honor retail responsibilities and get liquidated on Aave, which would likely force stETH to depeg even further. This would put the Maker protocol at the risk of not being able to retrieve all the Dai Celsius borrowed.

Around 58% of the 83 voters on the proposal felt that the tail risk presented by Celsius was greater than the loss of revenue from Aave by passing the proposal. The pause will come into effect at 5:03 pm EST on Friday.

Related: BitBoy founder threatens class action lawsuit against Celsius

A separate Tuesday governance proposal was put forth on Aave itself to determine whether it should freeze stETH, pause ETH borrowing and increase the liquidation threshold for stETH borrowers. However, opponents have a steep edge on this proposal, with nearly 90% of the vote at the time of writing.

Maker’s move is an example of decentralized finance (DeFi) protocols observing contagion in the ecosystem and attempting to protect themselves from getting tagged. In addition to Celsius, crypto investment firm Three Arrows Capital is now suffering the effects of contagion and threatening to spread it further, with reports of a $400 million liquidation and its inability to meet margin calls.

State securities regulators investigate Celsius over withdrawal suspension: Report

Reports from different media outlets in the last week also suggested the Celsius Network has lost major backers and onboarded new attorneys amid a volatile crypto market.

Securities regulators from five U.S. states have reportedly opened an investigation into crypto lending platform Celsius Network over its decision to suspend user withdrawals.

According to a Thursday report from Reuters, Texas State Securities Board director of enforcement division Joseph Rotunda said regulators in Alabama, Kentucky, New Jersey, Texas and Washington began investigating Celsius after the platform announced it would be “pausing all withdrawals, swaps and transfers between accounts.” Rotunda reportedly called the investigation a “priority” for the Texas regulator and confirmed to Cointelegraph the enforcement division was “looking at the issue involving the frozen accounts.”

“I am very concerned that clients — including many retail investors — may need to immediately access their assets yet are unable to withdraw from their accounts,” the enforcement director reportedly said. “The inability to access their investment may result in significant financial consequences.”

The report on a possible investigation into Celsius followed a Wall Street Journal report from Thursday that two firms that habacked the crypto lending platform during a November 2021 funding round did not plan to provide additional funds due to the potential risks, citing people with knowledge of the situation. WestCap Group and Canadian pension fund Caisse de dépôt et placement du Québec led a $750 million Series B funding round for Celsius, which helped the platform reach a $3.5 billion valuation.

With the crypto market experiencing significant volatility in June, Celsius has reportedly onboarded attorneys to find different solutions to the current financial challenges faced by the company. CEO Alex Mashinsky took to Twitter on Wednesday — breaking a three-day social media silence — to say that the Celsius team was working “non-stop” to address user concerns.

The Texas State Securities Board also took action against Celsius in September 2021, initially scheduling a hearing related to allegations that the network had offered and sold securities in the state that were not registered or permitted, in addition to the platform not registering as a dealer under Texas’ Securities Act. The New Jersey Bureau of Securities issued a cease and desist order against Celsius for similar alleged violations of the state’s securities laws.

Related: SEC chair warns about ‘too good to be true’ returns amid market downturn

Major cryptocurrencies including Bitcoin (BTC) and Ether (ETH) have dipped close to $20,000 and $1,000, respectively, in the last seven days amid extreme market volatility. Possibly in response to these losses, many crypto exchanges have announced staff cuts between 5%–20%, including Coinbase, Gemini and Crypto.com.

Cointelegraph reached out to Celsius Network, but did not receive a response at the time of publication.

BitBoy founder threatens class action lawsuit against Celsius

BitBoy Crypto founder Ben Armstrong said that Celsius won’t let him withdraw money from the platform without sending more money to it first.

Just two weeks after appearing in an ask me anything (AMA) with Celsius founder Alex Mashinsky, crypto Youtuber Ben Armstrong has announced he intends to file a class-action lawsuit against the lending platform and its chief executive.

Armstrong made legal threats via Twitter on Wednesday and has since provided more detail in multiple threads. His issue is centered on being unable to pay down loans with existing funds on the platform, and instead, having to deposit new funds to pay the loans off:

“[Our account rep] told us we had enough money in our account to pay off a loan. But we can’t use money in our account. We HAVE TO SEND CELSIUS MORE MONEY TO PAY IT OFF.”

“Imagine an insolvent company that you can’t withdraw your money from ASKING YOU TO SEND THEM MORE MONEY,” he added.

Armstrong stated that he is currently working through the process of getting all “disclosures, documents, loan details, etc” put together while speaking to attorneys to explore the best ways to go about the class action. Co-plaintiffs have yet to be added as Armstrong hasn’t “officially began moving.” 

BitBoy Crypto is the second most subscribed crypto YouTube account with roughly 1.45 million subscribers and primarily provides commentary on market news/events. The channel is only behind Coin Bureau and its 2.07 million subscribers. BitBoy Crypto has plenty of detractors, too, some of whom allege that he has been paid to promote dubious crypto assets in the past.

Armstrong’s sentiments toward Celsius have swung wildly from just two weeks ago when he was featured on the ask me anything (AMA) session with Mashinsky on Celsius’ YouTube channel.

“And today I’m the victim. Kicking myself for wondering how I let this get so bad and so far,” he said.

Celsius is battling either insolvency or it’s experiencing severe liquidity troubles as a result of the crypto market plunge. The firm paused withdrawals on Monday, and also reportedly shifted around $320 million worth of assets to pay down loans and avoid liquidation on decentralized finance (DeFi) platforms such as Aave.

One issue to a potential lawsuit, however, is if Celsius files for bankruptcy because it will trigger a provision called “automatic stay,” which would prevent creditors from pursuing collection activity against the firm.

Celsius has reportedly onboarded restructuring lawyers from Akin Gump Strauss Hauer & Feld to find potential solutions for its financial troubles. However, Armstrong claims that these types of lawyers “specialize in MOSTLY preparing companies for bankruptcy.”

“Even if Celsius does file bankruptcy, we have discovered some potential workarounds to still do a class action lawsuit (not effected by bankruptcy). Unfortunately I have to keep that one close to the vest for now,” he said.

Related: DeFi contagion fears and rumors of Celsius and 3AC insolvency could weigh on NEXO price

In terms of recouping funds from Celsius, there does at least appear to be a potential option for users with less than $25,000 on the platform to obtain their assets in the immediate future. Joshua Browder, founder of robot lawyer DoNotPay, tweeted a step-by-step strategy on Wednesday on how users might be able to get funds back:

“As of right now, these exchanges have not yet filed for bankruptcy protection. Therefore, they are subject to small claims court judgements. Small claims court cases typically take 1-2 months. As long as this drags on longer than that, this strategy will work.”


Total supply of stablecoins dropped sharply for first time ever in Q2

A separate graph also saw USDC and BUSD supply drop sharply in May, however both have since rebounded and are close to being back to their respective all-time high levels.

The total supply of stablecoins saw its sharpest drop in history during Q2 2022, with stablecoin redemptions spiking as a result of “short-term liquidity and concerns about insolvency that were not present during the panic of 2020,” according to data analytics firm Coinmetrics.

CoinMetrics head of research and development Lucas Nuzzi highlighted the data via Twitter on June 16, with a graph showing the total supply of stablecoins since January 2020.

“22Q2 is the first time in the history of stablecoins where Total Supply decreased. Even if we exclude UST, over 10B has been redeemed *directly from the treasuries* of major issuers.”

The list included DAI, USDT, OMNI and TRON, SAI, USDK, PAX. While Circle’s USDC and Binance’s BUSD were compiled in a separate graph. Terra’s original variant of UST was not included in the graph.

Nuzzi noted that Tether saw the most redemptions of all centralized stablecoin issuers, with 7 billion of the total USDT supply wiped off the board in April and May, and is likely to have been caused by actions of a few, rather than any significant market-wide movements.

“The sharpness of that decrease suggests that a single entity, or small cohort, was behind it,” he said.

The implosion of the Terra eco-system including its native LUNA token and UST stablecoin in May coincided with Tether’s USDT de-pegging from the U.S. dollar by around 5%. As a result, around 7 billion USDT was redeemed as big players looked to exit the market and avoid any further potential carnage.

Another project to take a big hit was MakerDAO’s DAI, which saw 40% of its supply retired as a result of the “largest liquidation event of its history.”

USDC and BUSD were also included in a separate graph, and also show a sharp drop in supply of around 5 billion in May, however, both have since rebounded and are close to being back to their respective all-time high levels of around 65 billion and 48 billion a pop.

Related: DeFi contagion fears and rumors of Celsius and 3AC insolvency could weigh on NEXO price

The unique market conditions of 2022 offer a likely explanation as to why stablecoin users have been taking risk off the table over the past few weeks.

So far, the crypto sector has seen the Terra eco-system cause a crash worth around $40 billion, while lending platform Celsius and venture capital firm Three Arrows Capital have also been fighting to avoid insolvency due in part to reported liquidations, exposure to Terra, declining asset prices and potentially unsustainable business models.

Tether, which is also exposed to Celsius via $10 million equity investment in 2020 and a $1 billion loan it gave to the company last year, issued a statement on Monday noting that the plummeting price of Celsius native token and the firm’s liquidity troubles will have “no impact” on its reserves.

The firm stated that its lending activity with Celsius has “always been overcollateralized.”

BTC price crashes to $20.8K as ‘deadly’ candles liquidate $1.2 billion

Carnage for short-term traders and speculators as volatility destroys both long and short positions on the way to $20,000.

Bitcoin (BTC) came within $1,000 of its previous cycle all-time highs on June 14 as liquidations mounted across crypto markets. 

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

Bitcoin price hits 18-month lows

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD hitting $20,816, on Bitstamp, its lowest since the week of December 14, 2020.

A sell-off that began before the weekend intensified after the June 13 Wall Street opening bell, with Bitcoin and altcoins falling in step with United States equities.

The S&P 500 finished the day down 3.9%, while the Nasdaq Composite Index shed 4.7% ahead of key comments from the U.S. Federal Reserve on its anti-inflation policy.

The worst of the rout was reserved for crypto, however, and with that, BTC/USD lost 22.4% from the start of the week to the time of writing.

The pair was also “uncomfortably close” to crossing the $20,000 mark, trading firm QCP Capital noted, this representing the all-time high from its previous halving cycle, something which had never happened before.

In a circular to Telegram channel subscribers, QCP flagged both the inflation topic and potential insolvency at fintech protocol Celsius as driving the sell-off.

“We have been expressing concern about the collapse of a significant credit player since the LUNA blowup. The market is now panicking about the impact and contagion if Celsius becomes insolvent,” it explained:

“Some key liquidation levels that the market is looking out for are 1,150 in ETH, 0.8 in stETH/ETH and 20,000 in BTC. We are getting uncomfortably close.”

For other analysts, all bets were off when it came to guessing the BTC price floor or whether key trendlines would hold as support.

Rekt Capital warned that the 200-week simple moving average (SMA) at $22,400 had not been accompanied by significant volume interest, leaving the door open for a test of lower levels.

“BTC has reached the 200-week MA but the volume influx isn’t as strong as in previous Bear Market Bottoms formed at the 200 MA,” he told Twitter followers:

“But downside wicking below the 200 MA occurs & perhaps this wicking needs to occur this time to inspire a strong influx of volume.”

At the time of writing, the 200 SMA appeared to be acting more like resistance than support on low timeframes.

BTC/USD 1-week candle chart (Bitstamp) with 200 SMA. Source: TradingView

Altcoin futures index shows full force of retracement

On altcoins, Ether (ETH) fell to 40% below the previous week’s high to near the $1,000 mark.

Related: Lowest weekly close since December 2020 — 5 things to know in Bitcoin this week

Should that break, it would be the first time that ETH/USD had traded at three-digit prices since January 2021. As Cointelegraph reported, the pair had already crossed its $1,530 peak from Bitcoin’s previous halving cycle.

Across altcoins, there was little cause for celebration in this downtrend, Rekt Capital argued, highlighting flagging alt presence versus Bitcoin.

In a sign of the pain affecting all crypto traders, meanwhile, data from on-chain monitoring resource Coinglass confirmed cross-market liquidations passing $1.2 billion in just 24 hours.

Crypto liquidations chart. Source: Coinglass

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Bitcoin derivatives data shows no ‘bottom’ in sight as traders avoid leveraged long positions

Is it time to be greedy? Experienced market makers and arbitrage desks have turned strongly risk-averse as BTC price dropped to $22,600.

Bitcoin (BTC) lost the $28,000 support on June 12 following worsening macroeconomic conditions. The United States Treasury 2-year note yield closed on June 10 at 3.10%, its highest level since December 2007. This shows that traders are demanding higher rates to hold their debt instruments and expect inflation to remain a persistent challenge.

Louis S. Barnes, a senior loan officer at Cherry Creek, stated that as the United States reported its highest inflation in 40 years, the mortgage-backed securities (MBS) markets had zero buyers. Barnes added:

“Stocks are down 2% today [June 10], but would be down a hell of a lot more if considering what a full-stop to housing will mean.”

MicroStrategy and Celsius leverage use raised alarms

Bitcoin’s sell-off is adding more pressure to the cryptocurrency market and various media are discussing whether the U.S. Nasdaq-listed analytics and business intelligence company MicroStrategy and its $205 million Bitcoin-collateralized loan with Silvergate Bank will add to the current crypto collapse. The interest-only loan was issued on March 29, 2022, and secured by Bitcoin, which is held in a mutually authorized custodian’s account.

As stated by Microstrategy’s earnings call by chief financial officer Phong Le on May 3, if Bitcoin plummeted to $21,000, an additional amount of margin would be required. However, on May 10, Michael Saylor clarified that the entire 115,109 BTC position could be pledged, reducing the liquidation to $3,562.

Lastly, Crypto staking and lending platform Celsius suspended all network withdrawals on June 13. Speculations of insolvency quickly emerged as the project moved massive amounts of wBTC and Ether (ETH) to avoid liquidation at Aave (AAVE), a popular staking and lending platform.

Celsius reported surpassing $20 billion in assets under management in August 2021, which was ideally more than enough to cause a doomsday scenario. While there is no way to determine how this liquidity crisis will unfold, the event caught Bitcoin’s investors at the worst possible moment.

Bitcoin futures metrics are near bearish territory

Bitcoin’s futures market premium, the primary derivatives metric, briefly moved to the negative area on June 13. The metric compares longer-term futures contracts and the traditional spot market price.

These fixed-calendar contracts usually trade at a slight premium, indicating that sellers request more money to withhold settlement for longer. As a result, the three-month futures should trade at a 4% to 10% annualized premium in healthy markets, a situation known as contango.

Whenever that indicator fades or turns negative (backwardation), it is an alarming red flag because it indicates that bearish sentiment is present.

Bitcoin 3-month futures annualized premium. Source: Laevitas.ch

While the futures premium had already been below the 4% threshold during the past nine weeks, it managed to sustain a moderate premium until June 13. While the current 1% premium might seem optimistic, it is the lowest level since April 30 and sits at the edge of a generalized bearish sentiment.

An unhealthy derivatives market is an ominous sign

Traders should analyze Bitcoin’s options pricing to further prove that the crypto market structure has deteriorated. For example, the 25% delta skew compares similar call (buy) and put (sell) options. This metric will turn positive when fear is prevalent because the protective put options premium is higher than similar risk call options.

The opposite holds when greed is the prevalent mood, which causes the 25% delta skew indicator to shift to the negative area.

Deribit 30-day Bitcoin options 25% delta skew. Source: laevitas.ch

Readings between negative 8% and positive 8% are usually deemed neutral, but the 26.6 peak on June 13 was the highest reading ever registered. This aversion to pricing downside risks is unusual even for March 2020, when oil futures plunged to the negative side for the first time in history and Bitcoin crashed below $4,000.

The main message from Bitcoin derivatives markets is that professional traders are unwilling to add leverage long positions despite the extremely low cost. Furthermore, the absurd price gap for put (sell) options pricing shows that the June 13 crash to $22,600 caught experienced arbitrage desks and market markers by surprise.

For those aiming to “buy the dip” or “catch a falling knife,” a clear bottom will only be formed once derivatives metrics imply that the market structure has improved. That will require the BTC futures’ premium to reestablish the 4% level and options markets to find a more balanced risk assessment as the 25% delta skew returns to 10% or lower.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Nexo offers to buy out Celsius’ loans amid withdrawal suspension

Nexo platform could rescue Celsius’ customers after “what appears to be the insolvency of the Celsius Network.”

There’s a glimmer of hope for the bear market’s most recent victim. Following reports that Celsius is insolvent, Nexo is offering a buy-out.

A Nexo representative told Cointelegraph that Nexo is trying to do the “right thing” as they are “mindful of the repercussions for retail investors & the crypto community.”

Celsius suspended all network withdrawals on Monday; users are not able to access their funds. In an open letter, Nexo has extended a formal offer to acquire qualifying assets of Celsius Network after their withdrawal freeze. The letter states:

“Nexo, its partners, and affiliates could readily acquire from Celsius part or all qualifying, outstanding collateralized loan receivables secured by their corresponding pledged cryptocurrency collateral, subject to Nexo’s risk management and collateral requirements.”

In a nutshell, the Nexo team would absorb all of Celsius’ loans and gain its customer database. The Nexo team has allowed seven days for the Celsius team to respond, as the proposal will terminate on June 20.

In a tumultuous weekend of market action, Nexo’s first call to help was rejected by the Celsius team on June 12:

“Yesterday [June 12], we reached out to the Celsius team to offer our support, but our help was refused.”

Separately, Nexo has reassured investors that funds are safe. The Nexo representative told Cointelegraph it was “the first crypto lender to publicly open its books to the public in real time back in September and invited all our competitors and responsible crypto platforms to follow our lead.”

Competitors including Ledn, a Bitcoin-only (BTC) credit and savings product platform have released similar statements to spread calm among investors.  In a tweet, Ledn shared that customers’ investments are secure. BlockFi CEO Zac Prince tweeted that his business is operating normally.  Ledn, Nexo and Blockfi have been open to talking about their business models with Cointelegraph previously.

Related: Mashinsky says ‘Sharks of Wall Street’ circling around Celsius and other projects

Nexo is not the only company to come to the aid of Celsius. Bitcoin maximalist Cory Klippsten, founder of Bitcoin-only exchange Swan Bitcoin (who had previously called out Celsius as risky) has offered a “life raft” to Celsius investors. 

For some commentators, such as analyst Will Clemente, comparisons between Luna’s implosion and Celsius’ apparent insolvency are too hard to ignore:

As Klippsten and Nexo have made clear, the crypto community is attempting to limit the immediate fallout of Celsius’ reported insolvency. The Nexo spokesperson said “[Nexo] hopes Celsius will accept this help and as few investors will be affected adversely as possible.”

Celsius exodus: $320M in crypto sent to FTX, user withdrawals paused

Celsius has been moving more than a quarter of a billion dollars worth of funds from Aave into the FTX exchange for reasons not specified, in addition to suspending withdrawals for users.

Crypto staking and lending platform Celsius may be dealing with its rumored liquidity crisis by unstaking $247 million worth of Wrapped Bitcoin (wBTC) from Aave and sending it to the FTX exchange.

Speculations among the crypto community are now flaring as the project has been moving massive amounts of wBTC, Ether (ETH) and other crypto assets, in addition to pausing withdrawals for users.

Celsius users have criticized the platform for how they believe the project has mismanaged its funds following the collapse of the Anchor Protocol on the now-named Terra Classic blockchain. The project could be addressing those concerns with the recent moves to stabilize liquidity.

Some think that if Celsius fails, it would sell its significant stack of staked ETH (stETH), which would cause it to depeg further from ETH. stETH is a token provided by the Lido decentralized finance (DeFi) lending platform that is given as proof that a user has staked ETH. It is currently trading about 4.4% lower than ETH.

Unusual token movements began at about 6:00 pm EST on Sunday from Celsius’s main DeFi wallet when it started removing wBTC from the Aave staking and lending platform, which Celsius used to earn interest on its deposits.

So far, 9,500 wBTC tokens, worth about $247 million at the time of writing, have been redeemed from Aave. Following a series of transactions, all of those tokens have been sent to the FTX exchange for an unknown reason.

In addition to wBTC, it appears that 54,749 ETH, worth about $74.5 million at the time of writing, have been sent to FTX.

While such activity bodes very poorly for the transparency of Celsius until it explains the moves, the firm may be trying to ensure its liquidity is stable by replacing many of the volatile funds like WBTC and ETH it withdrew from Aave with stablecoins.

Since Sunday, Celsius has staked 204 million USD Coin (USDC) stablecoins on Aave. It also has deposited 10 million USDC plus about 8.2 million Dai (DAI) stablecoins to Compound, another DeFi staking and lending platform.

The total 222 million stablecoins re-staked by Celsius is almost equal to the value of wBTC tokens it removed, but still does not come close to matching the combined value of WBTC and ETH.

The Celsius team’s plans with the crypto that have been moved are still not clear. There is a real possibility that it could sell the assets it sent to FTX, but another likely option is that it intends to stake the tokens they are sending to the exchange to earn yields.

As of the time of writing, Celsius has sent 9,500 wBTC, 54,749 ETH and 375,343 FTX Token (FTT) all worth $10 million. Moreover, it has 2,455 Polygon (MATIC), or $1,158, 260,000 Uniswap (UNI), or $1 million, 2 million Pax Dollars (USDP) and 300,000 TrueUSD (TUSD) stablecoins to FTX. However, token movements were still taking place by 11:00 pm EST.

Presently, Celsius users might be biting their nails in anxiousness because the platform paused withdrawals in order to “put Celsius in a better position to honor, over time, its withdrawal obligations,” according to an announcement from the project on Monday:

“We are working with a singular focus: to protect and preserve assets to meet our obligations to customers.”

Cointelegraph reported in May that Celsius CEO Alex Mashinsky deflected blame for the problems facing the platform, including rumors of insolvency, to shadowy opportunists on Wall Street.

Related: Bitcoin price drops to lowest since May as Ethereum market trades at 18.4% loss

Crypto investors are largely unimpressed with the new round of FUD coming from Celsius. The total crypto market cap has dropped 7.6% to $1.07 trillion over the past 24 hours. CEL, Celsius’s own token, has dropped more than 60% over the past 12 hours to $0.15. All prices listed in the article came from price tracker CoinGecko.