Documents revealed by The Wall Street Journal on Wednesday (29) show that the melted company Celsius – which is heading for the third week of blocking customer withdrawals – had in 2021 twice the leverage that traditional US banks normally have, which increased the risk of the business. In addition, the company had ambitious projections: it predicted that deposits on its platform would reach US$ 108 billion in 2023.
Cryptocurrency lending company Celsius halted withdrawals on June 13. More recently, he began to face his own lawyers to avoid filing for bankruptcy in the US Courts.
Read too: Celsius Creator Disappears After Locking $12 Billion of Customers and Dropping Bitcoin Price
The WSJ report points out that the company had US$19 billion in assets and US$1 billion in equity (a term that designates how much money the owners of a company would have if all assets were liquidated and debts paid). The average of the banks that make up the S&P 500 Index is a ratio of 9 to 1 – that is, less than half of what Celsius had.
This ratio between assets and equity is observed by the market to identify the degree of risk in the operations. Economist Eric Budish said in a newspaper interview that Celsius was risky: “It looks to me as diverse as the mortgage portfolios were in 2006. It was all home real estate. It’s all crypto now.”
Also according to the Wall Street Journal, Celsius projected to attract US$108 billion in 2023 and forecast revenue of US$6.6 billion for the same year.
Celsius asked for patience
Celsius posted a note on his blog asking for patience for customers. “This process will take time”, said the company, which assured that its objective remains “to stabilize liquidity and operations”.
Celsius claimed that there was “an open dialogue with regulators and authorities” and that it aims to “find a solution” to the current problem it faces.
Meanwhile, BnkToTheFuture, the main investor in Celsius, offered to help the company by implementing a “financial innovation”, similar to the one it used to bail out crypto exchange Bitfinex.
Other companies facing similar situations are also turning to partner support. Crypto lender BlockFi has secured a $250 million revolving line of credit with Sam Bankman-Fried’s FTX exchange.
A few weeks ago, he said his company has a “responsibility” to help companies struggling during this relentless bear market. In addition to BlockFi, FTX also recently bailed out a crypto operator from Voyager Digital.
