Celsius Network Halts All Withdrawals As It Faces Liquidity Crisis, CEL Tanks 45%

Lending platform Celsius Networks made a major announcement recently that it has paused all withdrawals on the platform, a move that it calls is in the interest of the community. Following the announcement, CEL, the native token of the Celsius Network is facing intense selling pressure crashing 45% and dropping to $0.20. The announcement notes:

Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, Swap, and transfers between accounts. We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations.

Celcius has been previously rumored to sell staked ETH (stETH) in major quantities to restore liquidity to its users’ withdrawals. Just as the news pours in, Celsius has reportedly transferred WBTC and ETH in massive quantities to the FTX crypto exchange three hours ago. As of press time, Bitcoin and ETH are both trading 8% down each.

Major Liquidations Coming Ahead

If Celsius Networks continue to sell more and more assets to be its liquidity obligations, we are likely to witness more sell-offs in the broader crypto space. In the announcement, Celsius Network notes:

We are working with a singular focus: to protect and preserve assets to meet our obligations to customers. Our ultimate objective is stabilizing liquidity and restoring withdrawals, Swap, and transfers between accounts as quickly as possibleWe are taking this necessary action for the benefit of our entire community in order to stabilize liquidity and operations while we take steps to preserve and protect assets.

This is another major case after Terra’s collapse last month wherein a platform has to sell its reserves in order to meet the liquidity obligations. Surprisingly, Celsius Network was planning for an IPO last month. With its recent actions, Celsius might be facing tough regulatory actions going ahead.

Another red flag is that Celsius Network has been borrowing heavily in stablecoins USDT and USDC to meet its liquidity positions. Another big thing is that Celsius Network has 288,000 ETH staked in an ETH 2.0 contract.