The Celsius Network has called for users to exercise patience as they hope to stabilize liquidity and operations. About a week ago, Celsius paused withdrawals due to extreme market conditions. The protocol was faced with liquidity issues after various investments went south.
In a blog post sent to its community members on Monday, Celsius said:
“We want our community to know that our objective continues to be stabilizing our liquidity and operations. This process will take time.”
Celsius also added that it will continue to maintain an open dialogue with community members. The company will constantly share progress reports and updates related to the critical situation.
The protocol is also working closely with regulators and officials, as both parties aim to find a reliable solution to the financial problem.
Celsius’ Diversified Portfolio Couldn’t Save the Network
Celsius serves as an investment intermediary for users. The platform handles the funds of clients, offering specific returns to investors. Notably, the Celsius network offered an APY as high as 8% for staking Stablecoins.
The protocol collects funds from investors, distributes these funds into various asset classes and staking pools, and then rewards users with a portion of the profits made from the numerous investments.
Although the network has a diversified portfolio, a majority of the company’s holdings have turned out to be bad investments. Celsius invested in UST prior to the crash and relaunch of the token.
Celsius’s recent huge loss came from staked Ether in Lido pools. The liquidity pool lost its demand-supply balance, causing the price of stETH to deviate significantly from ETH. While some other whales and investment protocols exited their stETH positions early enough, Celsius were victims of the price instability and they paid heavily for it.
At the moment, the company is in an insolvent state, and the team needs to act quickly and prudently. Further errors in strategic planning and asset management could mark the end of the protocol.
