i've been saying for two or three years now that in crypto a lot of the projects you see going
on here are going to go to zero but there are amazon.coms in there somewhere the major protocol
layers the significant network technologies those are going to make it out here stronger than ever
two years from now but things are gonna get shaken out now the scams the charlatans the easy money
guys those people are gonna get shaken out in the next six months and you're starting to see
that now welcome back everybody to altcoin daily today is a dark day in cryptocurrency celsius
is bringing down the entire cryptocurrency market celsius tanks 70 in one hour after company pauses
withdrawals they're a 10 billion company a lot of people have a lot of crypto on this platform
and if you do if you have bitcoin on celsius you are no longer currently able to withdraw it you
cannot get access to it this is to as they say stabilize liquidity the crypto lender paused all
customer withdrawals and swaps on sunday night citing liquidity issues cell token quickly went
off a cliff in today's video i'm going to explain this simply tell you what celsius is tell you
why they had to pause withdrawals why this is a crisis for the entire industry and what to think
about going forward particularly if you have money in celsius and particularly if you're in crypto
at all because this truly affects the whole market we'll hear more from brian brooks in just a second
if you appreciate our daily videos smash the like button and let's jump into it the celsius blow-up
explained first of all it seems like huge sectors of crypto have been imploding over the past couple
months and crypto unicorns might be coming down with it luna was first and now 10 billion
giant celsius is facing insolvency and even bankruptcy allegedly let's dive in first of all
what is celsius well celsius is a decentralized d5 company that custodies and manages crypto on
behalf of investors they're basically traditional financial services for the crypto industry they
take your money or they take your crypto they promise you a fixed interest rate and then put
it on chain and use it in defy to earn a yield so they advertise that their services are like
that of a bank the service is almost more like a hedge fund or asset manager these strategies
have some risk involved and require supervision so how exactly do they make their money really
two different ways number one originating loans to institutions and individuals and number two
they keep whatever profits are left after running strategies on behalf of their customers so if they
advertise five percent on usdc stablecoin deposits then swap that usdc to make 20 percent on say
tara's stablecoin ust they can keep 15 and celsius did phenomenally well with this throughout 2020
and 2021 reaching a valuation of 10 billion and recently raising 400 million the only issue
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of the best crypto apps around so let's break this down what events exactly led
celsius to halt withdrawals what happened to the money that they have on their platform
part one the luna collapse the luna collapse shook the industry and made waves in mainstream
media maybe the biggest wealth destruction event in crypto and celsius was involved luna promised
20 interest on usd pegged stable coins making it a super popular product advertised as low risk and
even risk-free but when markets began to shake the mechanism to hold that token at one dollar
failed leading to a death spiral and the failure of a 40 billion protocol and as luna collapsed
many speculated about big institutional players losing their shirts on their holdings and celsius
who promised strong rates on stable coins was exposed to the collapse by holding maybe
up to 500 million in ust and that's the customer's money that they lost by the way
but they had a buffer at least right hopefully they did brings us to part two lido staked eath
for eath deposits celsius promised six to eight percent in interest with a lot of it likely
earned from staking rewards on the proof-of-stake ethereum beacon chain the biggest issue with this
is that assets held on ethereum's beacon chain currently are completely locked up you can't
unstake for now crypto protocol lido solved this problem by creating a liquid derivative
asset called lido staked eath or st eth while st eth has often traded at a one to one ratio
it's not pegged meaning it doesn't have to trade one to one but celsius kind of counts on
st eth holding its ratio at one to one because it needs to match liabilities in a bull market
that worked out but with a liquidity crisis and bear market the s t e to e ratio technically not
a peg began to slide leading us here to part three the unwinding celsius has likely failed to isolate
their risk this is alleged meaning they might have taken their usdc and held it in ust luna's
stablecoin and they might have taken their eth and held it in st eth so when all of crypto drops and
all users want their funds back all celsius users feel the pinch it's all the same pool of money
celsius is facing a liquidity crisis one in which prices that are spiraling downward make it harder
and harder to match liabilities the deposits on their platform with assets whatever they hold
on chain so they shut down the withdrawals you can understand it like this there are about 10 billion
in customer assets in celsius but only about 1.5 billion accounted for in celsius various wallets
so in terms of matching customer funds to liquid assets that's a clear mismatch and that loss in
confidence inspires more and more people to withdraw which causes more and more people to
lose confidence which causes more and more people to withdraw etc etc so the big question is if it's
not liquid where exactly is the money well a few places there is about four million staked
on the ethereum beacon chain there's about another 400 million leveraged in maker protocol which by
the way has been alarmingly close to liquidation although celsius keeps topping up their position
it's important to note that these positions are often hunted by institutional trading desks firms
will actively try to push price down to get these big positions liquidated then make money on the
trade when the forced liquidation goes through and for the rest of the money who knows where it is
maybe it's lent out and on centralized exchanges and everything is kosher
maybe not so how does celsius solve this huge problem well first of all like i said it's
totally possible that they are totally solvent they have enough assets they're just illiquid
if that's the case they can try to negotiate with other institutions whales to offload big illiquid
positions for a discount however if their assets don't match liabilities outright they're kind of
screwed and they will require one external funding two alone or three an acquisition nexo has already
proposed to take over or they'll just go bankrupt in which case all of their depositors are outright
screwed and that would be really unfortunate for anybody who has their money in celsius not
your keys not your coins is obviously the safest way to protect your bitcoin as long as you're up
for that responsibility of holding your own coins but with crypto with bitcoin you have that power
here's the thing markets are obviously shaken by all this news and these big institutions are
becoming forced sellers this is not a good sign as always this invites regulation oversight and
legal action from governments institutions and critics a dark day in crypto for sure
let's jump back to brian brooks to shed more insight on what exactly should we be taking away
from this celsius crisis brian do you have any more color on what is actually happening in
some of these issues like a celsius or binance yeah absolutely and listen thanks for uh for
addressing this at this moment it's kind of a crisis for the crypto industry what i tell you
is you have a perfect storm of multiple things all happening at the same time so first you have
celsius blowing up it's the second big centralized crypto project in three weeks to blow up
that causes people to think the whole sector is infected at some level which it isn't but that's
a natural human reaction the second thing you have is you know bitcoin had its enormous rise during a
period of very very high inflation building up the economy and now you've got federal reserve
action and central bank action around the world taking aggressive steps to rain and inflation
which is a bad thing for bitcoin over time as an inflation hedge and then finally every stock in
the s p 500 literally all 500 stocks are down by a significant margin today specifically including
financials so it's a perfect storm everything that could be going wrong is and i've been saying
for two or three years now that in crypto a lot of the projects you see going on here are gonna go to
zero but there are amazon.coms in there somewhere right things you know the major protocol layers
the significant network technologies those are going to make it out here stronger than ever two
years from now but things are going to get shaken out now the scams the charlatans the easy money
guys those people are going to get shaken out in the next six months and you're starting to see
that now guys everything is going to work out the crypto market is getting battle tested as we speak
the weaker projects the less legitimate are getting shaken out the stronger projects
will come back with a vengeance i want to encourage everybody stick with cryptocurrency
the people who made the most money in 2021 were not the people that just showed up in 2021
they were the people watching us in 2018 2019 2020 and i believe that's where the biggest
opportunities are made the people who stick around during a bear market profit the most
in a bull market i don't think i'm the first to say that anyways subscribe to the channel and
join our team smash the like button hope you got value in today's video see you tomorrow