According to a report, crypto lending platform Celsius (CEL) was riskier for users than traditional banks Wall Street Journal Based on investor documents.
The lending platform has faced some serious problems over the past month, including freezing withdrawals, and has come under scrutiny from several U.S. states.
According to documents seen by the WSJ, Celsius made large loans backed by very little collateral and had no safety net in case the market started a downtrend.
According to the WSJ, the company has also made investments that would be difficult to quickly reverse if consumers rushed to withdraw their funds.
By the summer of 2017, before raising further capital, Celsius had accumulated more than $19 billion in assets and had approximately $1 billion in equity. This gives the company an asset-to-equity ratio of 19:1, which is nearly double the average asset-to-equity ratio of all North American banks, which is 9:1, the WSJ reported, citing data. facts told.
This ratio serves as an indicator of risk for investors, and the ratio is higher for a company like Celsius because some of its assets are in the form of highly volatile cryptocurrencies. This is in contrast to traditional banks, which hold assets in more stable areas and have access to central bank credit.
In 2021, Celsius raised $750 million from investors to expand its lending ecosystem. The lending platform has been popular with investors due to its high interest rates, with users earning up to 18.6% annually for depositing their crypto on the platform and 7.1% for stablecoins, which is higher than the average interest rate for savings accounts. is much more than. About 0.1%.
However, the company faced some major challenges during the year. Earlier this month, users reported difficulties when trying to withdraw funds. There were also rumors that the Celsius CEO was trying to flee the US.
Posted in: Investment, Lending
Get an edge in the crypto market
Join CryptoSlate Edge and access our exclusive Discord community, more exclusive content and analysis.
Sign up now for $19/month. Discover all the advantages