Cryptoliquidity crisis is a boon for this Swiss company
These are the two words investors hate the most: “Ponzi scheme”.
And that is the term that appears in a lawsuit filed in the New York State Supreme Court on July 7 against Celsius Network, the cryptocurrency lending company that suspended fund withdrawals and other operations from its platform last month.
“Our life savings are in your hands”
The case was brought by Jason Stone, founder and CEO of KeyFi, which was partly acquired by Celsius, who said in the complaint that “the recent revelation that Celsius does not have assets available to meet its withdrawal obligations shows that the defendants were, in fact run a Ponzi scheme. “
Celsius Networks did not immediately respond to a request for comment.
The relationship between Stone and the company began to break down, the complaint states, when Stone discovered that “not only did the defendants lack basic security controls to protect the billions in customers’ funds they had, but they actively used funds to manipulate crypto. to their advantage. “
Anger and fear of the Celsius situation raged through social media.
“Our savings are in your hands,” one person said twitret. “I ALWAYS ask you to do what’s best for depositors. We’ve entrusted our hard earned money to you and your company. Do what’s right!”
“Guys, if I do not get my money out, my marriage will end.” said another person. “over 785,000 gone.”
“Are you winning, Dad?”
And another tweet featured a picture of a stick figure hanging from a loop in front of a computer screen with the Celsius “Unbank Yourself” slogan, while another stick person asks, “Do you win, Dad?”
“Hi @CelsiusNetwork, “it says in the caption.” You are not good and deserve no place in crypto. Go f – k you. “
And that’s right when the crypto-lending platform Nexo sent a letter to Celsius containing an offer to buy “remaining qualifying assets to Celsius Network LLC and Celsius Lending LLC”.
“After what appears to be the insolvency of @CelsiusNetwork and considering the implications for their retail investors and the crypto community, Nexo has expanded a formal offer to acquire qualifying assets to @CelsiusNetwork after their withdrawal freeze, “Nexo said in a tweet.
Nexo’s name came up again recently when the cryptocurrency company Vauld warned that “we are facing financial challenges despite our best efforts.”
“A tectonic shift”
Vauld said the current market climate led to more than $ 197.7 million in customer withdrawals since June 12, when the decline in the cryptocurrency market was triggered by the collapse of Terraform Labs UST stablecoin, the Celsius network stopped withdrawals and Three Arrows Capital defaulted on its loans. .
The Singapore-based hedge fund Three Arrows Capital (3AC) was forced by a court in the British Virgin Islands to go into liquidation.
The crypto market was also hit hard in May by the collapse of TerraUSD, one of the largest stable currencies measured in market value
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Nexo said it signed a term sheet with Vauld, giving it a “60-day exclusive exploration period” for the intended acquisition of Vauld, pending a due diligence review.
“What follows represents a tectonic shift in the relationship between major counterparties,” said Antoni Trenchev, co-founder and managing partner of Nexo. “Trust is lacking; cheap and unlimited credit is no longer available. The downturn has immediately revealed unsustainable business models in both DeFi, as well as among crypto borrowers and other institutions.”
Unlike other players, Trenchev said: “Nexo was born in the middle of the crypto winter of 2018.”
“Our business is designed to have a range of applications and be sustainable even under such market conditions, and recent events have demonstrated the importance of these properties,” he said.
Market volatility
Primarily, with Nexo in a solid liquidity position despite the market, Trenchev added, “we feel it is our duty to offer help to struggling lenders, mostly because of their customers.”
“In these situations, it is usually the end user who pays the price, and it is simply not in Nexo’s interest for investors to leave the space,” he said. “In addition to Celsius and Vauld, there are several ongoing processes that Nexo has been contacted to help provide liquidity to those facing solvency problems.”
Nicholas Cawley, strategist at DailyFX, said that this potential consolidation “is another sign that well-capitalized crypto companies want to expand in the area, and that the current market volatility provides these opportunities.”
“Without any official ‘support lender of last resort’, some of these companies will go to very attractive values,” he said. “Consolidation in the area may continue, especially if current difficult market conditions continue.”
“The situation is exactly what is expected,” said Joshua Fernando, CEO of eCarbon. “During market boom growth, you will have many companies being created to ride the ‘wave.’ So when the market corrects, especially as severely as it has done, companies will consolidate to cope with the storm.”
“The underlying value”
The latter is what we now see with Nexo and Vauld, Fernando said, “a better capitalized company is turning to getting the assets of a smaller company for a discount.”
While some may be concerned about reduced competition, said Merav Ozair, blockchain expert and fintech professor at Rutgers Business School, “the fact that you have more competitors does not mean it’s better if you do not provide good service and good products.”
“It’s always better to have more competitors,” she said. “The free markets are about competition. But are these small players better? Do they give you better service? As for Celsius, probably not.”
Looking ahead, Trenchev said, “the crypto winter will inevitably end in the medium and long term.”
“In the near future, we must be aware that it is very unlikely that we will return to a large beef market quickly,” he said. “Despite this, we need to remember the underlying value behind blockchain technology and the financial revolution crypto can lead to.”
“These things have not disappeared and will only continue to evolve into the next bull cycle.”
