There are lots of news articles popping up about Celsius, such as this one in the FT and this one in Barron's, which have a very doomy tone, especially the FT.
What does Celsius do?
They're a sort of crypto bank. They take deposits of cryptocurrencies and pay interest on them. And lend money in USD and charge interest.
Their loans are collateralised with crypto. Why would you take out a collateralised loan with them? Because they don't do credit checks. Why not just sell your coins to meet your needs? They marketed it as loans to coin owners who had a temporary cashflow problem but didn't want to sacrifice future potential gains in their coins by selling them.
The amount of interest you pay depends on the amount of collateral you put up. Here is a screenshot from their FAQ:
If the coin you have used as collateral starts to drop, they issue margin calls to deposit more coins or repay some of the loan in dollars.. They also have a liquidation price as a condition of the loan which they describe as follows: "if the price of this coin drops below this amount, we will sell some of your collateral to cover the margin".
What about depositors?
The depositors got interest based on the coin they deposited. Bitcoin might net you 4%. Other coins would net you more. And if you held their own token CEL you got 18%. If you deposited bitcoin, but chose to receive your interest in CEL, you got bonus interest on top.
You can see what the problem is
The crypto crash is causing margin calls to go out, and coins to be liquidated - and for the smaller coins, this forced selling is making things worse. The people being liquidated are moaning about unfairness on Twitter. My guess is that these folk rode out previous bear markets by hodling, and the world of forced liquidations has come as a terrible shock to them.
Meanwhile those holding CEL have lost 62% in the last month. Celsius had $24bn in assets held on their platform in Dec 2021. It's now $12bn - partly down to the drop in crypto prices, partly because scared depositors are withdrawing their coins and selling them for cash.
Celsius also own a crypto mining subsidiary, which they are in the process of listing on the NASDAQ. The proceeds from that sale should keep them going as long as the crypto winter doesn't last too long. The future of crypto depends on companies like Celsius surviving.
