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Celsius in the red: Citigroup bank to the rescue of the crypto giant

TradFi, great savior of Celsius – After a freezing of operations Having caused a stir, the lending platform is seeking to get out of its delicate situation. Indeed, its bold positions on the digital asset stETH got him in trouble during the crash having affected the entire crypto ecosystem. Among other steps to get back afloat, Celsius has just sought the expert advice of the banking giant Citigroup.

More than financial support, Citigroup brings strategic expertise to Celsius

The lending protocol therefore called on the traditional banking sector to help him get out of his bad patch. It is not a question here of bailing out the coffers. Rather, the bank should play an advisory role with respect to the various possible financing routes.. In this context, Citigroup wants to help Celsius assess all the options that have appeared on the negotiating table. We think, for example, of the competitor Nexo who has officially approached his counterpart. When the liquidity problems appeared, he offered to buy back some of his qualifying assets (mainly his portfolio of secured loans).

Citigroup and Celsius are longtime allies. Indeed, the bank would have already advised Celsius on various activities and on its initial public offering (IPO) projects. The approach was then to make public the activity of its bitcoin mining subsidiary. Indeed, the protocol still had recently the intention to make his IPO. In May, a confidential draft S-1 registration for the subsidiary’s IPO had even been filed. A mandatory step in view of an in-depth examination by the Securities and Exchange Commission (DRY).

The fall in prices has trapped users of the Celsius protocol

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A sequence of events that does not surprise specialists in the crypto-sphere

For Kaiko, a crypto research firm, the celsius drop is multifactorial. A report, released Wednesday, points to a combination of poor risk management, bearish market conditions and overexposure to stETH (staked ether, an ether derivative representing the V2 of ETH tokens). An explosive cocktail that put the company in a position quite similar to the tragic history of the bank Lehmann Brothersduring the subprime crisis.

“Even if it survives this ordeal, I don’t see how anyone can trust people like Celsius to keep their assets safe in the future. »

Conor Ryder, analyst at Kaiko

Aware of legal turmoil who awaits him, Celsius also hired, a little earlier in the week, the lawyers of the firm Akin Gump Strauss Hauer & Feld LLPa team specializing in restructuring debt and insolvency management. An approach that can be a sign of goodwill or, on the contrary, a strategy of defiance, depending on whether you like to see the glass half full or half empty.

Whatever the outcome of this case, cryptophiles adept at these DeFi stamped protocols will leave for a good lesson. Indeed, the proliferation of setbacks currently affecting some giants of the crypto ecosystem demonstrates that the human factor remains the weak link of blockchain technology. In the future, investors will no doubt be quicker to ask the right questions to truly understand how the return paid to them is generated. They may well finally become the responsible and invested users who will proactively decide which platforms are trustworthy, and which are not.

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