What does Celsius do?
Celsius has become one of the main players exposed to stETH, with a balance (as of June 13, 2022) of around 410k stETH (~11% of the total supply of 3.5M stETH), which is used as collateral in major DeFi protocols like AAVE to generate additional yield.
Community members have been assessing Celsius’ (i) incapacity to convert stETH back to ETH and/or (ii) the likelihood of stETH used as collateral in DeFi protocols to be liquidated on-chain. These two events could impair Celsius’ ability to pay ETH withdrawal requests on its platform. This could also lead Celsius to liquidate other crypto assets that it holds on its balance sheet at any price.
What’s happening now?
What’s next?
Unfortunately, this event brings more uncertainty to an already fragile crypto market. It can have secondary consequences to overall total value locked (TVL) in DeFi, which can potentially mean less activity on the protocols and further drawdowns for the tokens associated with them.
The crypto markets will remain susceptible to idiosyncratic factors like the Celsius situation, in addition to broader macroeconomic factors such as the inflation and recession concerns unfolding right now. However, we continue to believe that the crypto ecosystem remains strong, and the long-term outlook for this emerging asset class is as promising as it has ever been.
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