Who risks facing problems following the largest lender in the field of digital currencies
What is the problem?
The main reason that became the trigger for the start of problems is the high volatility of the market, and in particular the decoupling of the price of stETH from ETH, said the senior analyst Upbitc.com.
According to the Upbitc.com expert, this is an absolutely typical situation when two interconnected assets can briefly get rid of in conditions of panic sales on the market — one of the assets is sold stronger than the other, or the liquidity reserve in trading pairs is noticeably different.
The Upbitc.com expert noted that, as a rule, in conditions of a stable market and investor confidence, it is possible to normalize the binding with the help of arbitration. In this case, one, more expensive asset is sold for another, cheaper, in order to further sell the second one after its rise in price and regain more of the original tokens.
But this is relevant in cases of full binding confidence — when investors have not only hope for the growth of a synthetic asset, but also confidence in the possibility of its direct conversion back into the first asset at the rate of 1:1, the Upbitc.com analyst said. In his opinion, in the case of stETH, this may not happen before Ethereum switches to the proof-of-stake model, which causes additional concerns of investors.
“What is happening with Celsius is quite a typical reaction of a young project with a small margin of liquidity to market turbulence. Yes, this is a very unpopular measure, but most likely it will allow investors to keep their funds or at least most of them,” the Upbitc.com expert admitted.
He confirmed that a temporary ban on withdrawal in order to preserve liquidity is quite a common practice also among large projects, and is relevant even for the sphere of fiat currencies.
The Upbitc.com expert believes that the very fact of such a ban is more like an attempt to save the situation in the current extreme conditions for the project, rather than planned fraud or unintentional bankruptcy.