Three days after crypto lender Celsius abruptly announced pausing all customer withdrawals, company CEO Alex Mashinsky has finally broken his silence on the matter. However, if you are hoping for answers regarding when users can withdraw funds again, you’ll be disappointed.
In a Twitter post yesterday, Mashinsky spoke publicly for the first time since the crypto lending platform paused user withdrawals. Furthermore, he tried to assure the Celsius community that his team is working “non stop” on the issue and requested customers’ continued patience.
However, Mashinsky didn’t say when he aims or expects Celsius to start operating again. Soon after, Twitter users pleaded with the CEO for commitment to the security of customers’ deposits. But Mashinsky didn’t respond further.
What is Celsius’ Predicament?
On Sunday, Celsius paused all withdrawals to “stabilize liquidity” and “preserve and protect assets.” Further, this move came after Lido’s Staked Ether (stETH), a cryptocurrency offered on the platform, began experiencing irregularities.
stETH represents Ethereum locked on the Ethereum 2.0 beacon chain, which will eventually merge with the Ethereum mainnet. It is meant to be pegged to ETH’s value. Thus, people often use stETH as collateral for borrowing ETH on crypto lending platforms like Celsius.
But amid other crypto markets falling apart, stETH recently lost its peg to heavily fluctuating ETH. So if customers wanted to withdraw ETH, Celsius would sell off its stETH holdings.
Therefore, if many customers decided to withdraw, it would force Celsius to sell off significant portions of its $472 million stETH supply. That would further lower the price of stETH, leaving the company with insufficient liquidity to cover its ETH obligations.
Meanwhile, it is still unclear how Celsius will get through this predicament if stETH remains depegged from ETH. At the time of writing, stETH is trading at 0.94 ETH.
What’s Next For Celsius?
Recently, the crypto firm reportedly hired restructuring lawyers to consult regarding its mounting financial problems if other financing sources cannot be found.
On Sunday, Celsius’ withdrawal freeze caused its native token CEL to plummet 70% within just an hour. However, Mashinsky was tweeting much more liberally just a day before, bashing a Twitter user for spreading “fear, uncertainty, and doubt.” The Twitter user cited rumors about retail investors getting locked out of Celsius accounts.
The current situation seems to have taken the Celsius CEO entirely by surprise. Also, it remains unclear when and if the crypto lending firm will publicly release a plan to remedy its situation.