Celsius Pauses Withdrawals As CEL Token Drops Nearly 40%: Here's What We know

Celsius (CEL) has paused all withdrawals owing to the extreme volatility in the crypto market where Bitcoin (BTC) fell to its 18-month low. The DeFi project has been aggressively selling its holdings to restore liquidity, according to the on-chain data provided by prominent crypto reporter Colin Wu.

As per the data from CoinMarketCap (CMC), the Celsius (CEL) token dropped by nearly 40% in the last 24 hours as of 12 a.m. ET following the announcement regarding the withdrawal halt.

"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," the official blog post from Celsius read.

Celsius describes itself as "an all-in-one banking and financial services platform for cryptocurrency users" providing services like crypto loans and interest on lending crypto.

"We 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," Celsius added, confirming that the lenders will continue to receive rewards in the said period.

According to Colin Wu's Twitter posts, the DeFi lending and borrowing protocols have been actively shorting Ether (ETH) and it seems that the firm is a major reason why ETH crashed by nearly 8% in the last 24 hours as of 12 a.m. ET.

It is nearly confirmed that Celsius is facing a liquidity crisis which means that the entity lacks withdrawable assets or "easy to convert" assets. As per a blog post from the firm, only 27% of the Ether holdings of the firm are liquid, the rest is locked up in staked ETH awaiting the successful implementation of The Merge.

If The Merge fails or gets delayed, a huge chunk of liquidity for Celsius is inaccessible. On the other hand, a Twitter post from Jacob Silverman, a staff writer for The New Republic, stated that Celsius's assets under management dropped by $5 billion in May. Silverman believes that the CEO of the firm, Alex Mashinsky, cashed out, initiating a rug pull last month.

The CEO has been yelling at people in AMAs since they expressed their concerns in May, Barrons reported.

Interestingly, as per Nansen.ai, an on-chain forensics firm, Celsius was one of seven whale wallets that contributed to the UST depeg which caused investors to lose billions in the collapse of Terra.