Why Celsius Went Bankrupt?
Celsius Network’s Bankruptcy is something that affected the whole crypto market as Bitcoin lost more than 10% of its value on 13th July 2022, the day Celsius filed for chapter 11 bankruptcy. It had 450 employees and provided services all over the world but later it said good bye to 150 employees during the bear market. It is strange that why after serving for more than 5 years, the firm went bankrupt immediately. We have analyzed the situation deeply and compiled various possible reasons behind the bankruptcy of the crypto lender.
5 Reasons Why Celsius Network Bankrupted
Liquidity Crisis: Celsius was lacking liquidity before filing for bankruptcy. At this critical point, Celsius repaid $142.8 million (in form of Dai stablecoin) which furthered deepened its liquidity crisis.
High Rewards: The liquidity crisis didn’t show up at Celsius Network’s doorstep overnight. It is a problem which generated almost 3 months earlier. In June, it still continued to provide huge weekly rewards which further lowered its liquidity. Furthermore, the profit percentage provided by Celsius is also more than enough (17%).
Panic: The decision of halting withdrawals on the 13th of June also added fuel to the fire because this move created fear and panic among traders and as a result, Celsius’s (CEL) token price plummeted to $0.21 from $7 within 24 hours. The timing was also very crucial because the market was already in a terrifying condition after the collapse of Terra Luna in May.
Failed Restructuring Attempt: After pausing withdrawals on 13th June, Celsius tried to restructure the firm. For that purpose, it hired Akin Gump law firm which charged a whopping $700k without providing any benefit.
Mismanagement of Assets: Mismanagement of assets is a big reason behind Celsius’s Bankruptcy. Celsius unstaked $247 million (in Wrapped Bitcoin wBTC) from Aave and sent it to FTX. This move further damaged the already worsened situation.
The Sinking Ship
The above-mentioned reasons are the major reasons behind the miserable condition of the Celsius Network. There are some other reasons as well like the lack of resilient leadership. Rod Bolger, the CFO of the crypto lender, resigned only to weeks before the bankruptcy filing. Recently, the CEO and founding member of Celsius- Alex Mashisnky- has also resigned. If the resources had been managed appropriately and the leadership worked diligently, the situation could have been different today.
