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Celsius Made Strange Movements After Freezing Funds

Someone made “mysterious” $300 million moves after freezing withdrawals until further notice. Nexo is considering buying.

In Short

  • Currently, Celsius is keeping withdrawals, exchanges, and transfers frozen.
  • The funds moved to the FTX exchange.

Celsius Made Strange Movements After Freezing Funds. Celsius, a bitcoin (BTC) and cryptocurrency lending and investment company is in the middle of controversy after freezing withdrawals from its platform. Just after the statement’s release, it became known that one of its wallets moved about $320 million in ether (ETH) and wBTC (bitcoin token in Ethereum) without explanation. 

An ethereum address identified as owned by Celsius has recorded constant outflows since the early hours of this June 13. Users registered Withdrawals of more than 6,000 wBTC and 50,000 ETH. Several withdrawals were against funds Celsius held on Aave’s decentralized lending platform as part of its collateral. Someone sent them to the FTX exchange

The event’s timeline notes that the withdrawals occurred minutes after the official freeze on withdrawals on the platform. The statement was published on Twitter at 6:10 PM UTC, while the first withdrawal transaction by WBTC was made at 6:46 PM UTC, as seen on the Etherscan portal. Subsequently, there have been six other transactions in which someone sent over $320 million in crypto assets. 

Some Twitter users, such as the case of @MikeBurgersburg, tracked the Celsius funds through the Ethereum blockchain:

Currently, the company has not made official the reason for the movement of these funds. It is only known that it has withdrawn its collateral in Aave and has communicated that it is trying to “maintain liquidity” on its platform during the withdrawal freeze.

There has been speculation that the moves to FTX could be to borrow collateral to cover its liquidity. Also, to sell crypto assets held by Celsius. But we should stress that, so far, there is no official explanation.


Celsius may bring about its downfall

Celsius could default due to the low liquidity it has. While this was a likely future scenario, the current situation seems to make it a reality, with the blocking of withdrawals and sudden movements of its reserves. 

Unable to provide liquidity is because many of its reserves are not directly in ETH but synthetic tokens, as in stETH. A token used to generate Ethereum 2.0 staking profitability on the Lido platform. The stETH token, in theory, should maintain 1:1 parity with ETH but is also subject to its variations determined by supply and demand. 

Now, Celsius recorded that about 50% of its ETH holdings were in stETH (over 400 thousand stETH). In a liquidity emergency, with massive withdrawals, Celsius will have to sell its stETH positions which would cause the token to lose parity. So the current move by Celsius to freeze withdrawals may be driven by the protection of its reserve capital in this type of token.


Nexo: competitors make a purchase offer

Meanwhile, the competition is already rubbing its hands. Nexo, a direct competitor, is making Celsius an offer to buy “certain assets, primarily secured loans and […] customer data“. According to the content of a corresponding “Letter of Intent” shared by Nexo on Twitter, the company has not encountered liquidity difficulties despite the current market situation.


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