Thread by @samuelmandrew

Crypto winter is freezing. @CelsiusNetwork is likely insolvent. Giant #cryto hedge fund is liquidating.

Here is what's happening: 🧵

4 things impacting crypto markets:
1. Macro - increased inflation and rate rise are having a magnified impact on high risk assets like crypto.
2. Celsius catastrophe - it's likely insolvent
3. @binance halting $btc withdrawals - spooked the market
4. 3AC liquidating

Celsius liquidation is a big deal because:
1. Causes forced selling of assets at distressed prices from many market participants.

2. Contagion. Plummeting prices are causing margin calls for everyone. 3AC is an example.

2. Another black eye for crypto.

Celsius model worked by taking in deposits from 1.7m ppl who received 19% yields. Celsius used the deposits and lots of leverage to generate 19% yields for investors. It also issued crypto loans.

Celsius mismanaged the duration of its investments and deposits. Deposits can be withdrawn daily, but it invested in illiquid investments. It also had an asset/liability mismatch. Assets are in crypto assets that have tanked while liabilities are in USD stablecoins

Celsius has 3 problems now:
1. Transparency - we don't know the state of Celsius balance sheet. On-chain analysis suggest equity value is shrinking. Halting withdrawals corroborates that something is terribly wrong.

2. Leverage - it has a $225m DAI loan that was nearly called this past week. It added more collateral because

a) it likely doesn't have funds to repay the loan in full
b) it's gambling that crypto rebounds saving it from bankruptcy

3. Illiquid stETH investment - Celsius largest investment is in stETH. It's illiquid and can't be sold.

Celsius is racing against time. They hope crypto price can rebound and the Ethereum merge is successful, which will allow their stETH to be redeemed for liquid ETH, before regulators, insolvency and class action suits from depositors take them down. It's not looking good.

Read my full piece to understand what happened with #CelsiusNetwork and what to look out for (hint restructuring process, market wide deleveraging, stETH/ETH widening)

samuelandrew.substack.com/p/freezing-cel…

Insights from the following ppl helped my research
@Crypto_Joe10 @Riley_gmi @MikeBurgersburg @jonwu_ @DylanLeClair_ @MoonOverlord @hodlKRYPTONITE @0xBarry

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