How are the problems of Celsius, 3ac and Steth will affect the price of Ethereum and the cryptocurrency market
Only the dust disappeared after the collapse of Terra, as in the spotlight of Celsius and the Head Fund Three Arrows Capital (3ac). According to some experts, these large players are close to bankruptcy, which can affect the entire cryptocurrency market.
Pour oils into the fire and Alameda Research. Along with Celsius and 3AC, this company actively sells Steth token, which is already far from parity with the price of Ethereum.
All this occurs against the background of a deep correction of the market, the recordly low values of the fear index and mass contractions in large cryptocurrency companies.
How are Celsius, 3AC and Steth related? How their potential bankruptcy and the possible collapse of the “staying ether” will affect the market? Forklog figured out these matters.
- According to the observations of some experts, Celsius used high-risk investment strategies, investing user funds in “experimental” Defi protocols.
- Three Arrows Capital and Alameda Research exerted significant pressure on the steth token, whose parity with Ethereum staggered against the background of Terra’s collapse.
- Further drop in the price of the “staining broadcast” is fraught with liquidation cascades that can negatively affect the Defi segment and the market as a whole.
Snow lump of problems Celsius
The centralized Celsius cryptocurred service in recent days has become the subject of hot discussions. The platform suspended the withdrawal of funds, exchange and transfers between accounts, referring to “extreme market conditions”.
In addition to the “staining broadcast”, a significant part of the portfolio (27% or $ 415 million) falls on tokenized WBTC bitcoin.
More than half of the funds under the control of Celsius are involved in AAVE Defi Protokol. On another landing platform – Compound – 40% of the total asset is placed.
Huobi Research Huobi Analysts Johnny Lowe and Andy Hu noted that previously Celsius lost almost $ 71 million due to steth on the Swiss StakeHound stake platform after incident with private keys. In June 2021, the latter accused Fireblocks of the loss of access.
“This was reported in the news a week ago and, having learned that the investments were in a dangerous position, Celsius users began to redeem their positions. The speed of withdrawal of funds was high, about 50,000 ETH per week, which forced Celsius to sell other assets such as Steth (in Lido stake), for ETH in secondary markets like Curve to get more liquidity ”.
Huobi Research researchers claim that only 27% ETH of their total volume at the disposal of Celsius are liquid.
“Celsius could only throw steth to buy ETH on the market to satisfy customer requests,” said Genesis Global Trading Noel Achecon in a conversation with Coindesk.
The suspension of the withdrawal of funds and massive sales occurred during a fall in bitcoin prices to the level of $ 20,000 and the collapse of capitalization before the marks of January 2021.
Against the backdrop of what is happening Native Token Celsius – Cel – in the moment collapsed to $ 0.09.
Soon, however, the price of the asset stabilized above $ 0.2, and then suddenly returned to the level of $ 0.5. Commenting on CEL restoration, Defiyst analyst noted that the Celsius team reduced the risks of debt positions on key landing platforms.
If the purpose of the product is to maximize income, it is necessary to effectively control the risks.
“You must be able to identify scenarios when the risk is not worth additional income, especially when it comes to users’ funds”.
NUCSI is convinced that Celsius did not have a reliable risk management system, but only “the desire to place millions in experimental Defi Protocols”.
As an example, the researcher cited losses of $ 120 million related to Badgerdao hacking.
“Many were then surprised that Celsius was ready to place WBTC in such a young protocol,” said Lucas Nuzci.
The expert gave another example: against the background of the Terra Death Spiral, the platform deduced at least half a billion dollars from Anchor.
“This means that Celsius was the Ust holder. We all know what happened to this asset.
Shortly after this CEO Celsius Network, Alex Mashinsky accused the “shark with Wall Street” of falling the cryptocurrency market, the tether stabblecin (USDT) of the US dollar and Terra’s collapse.
NUCSI noted that Celsius controls the largest WBTC storage on the MakerDao platform.
“Sharp changes on the schedule reflect an increase in liquidity. As you can see, by adding funds Celsius, he is persistently trying to avoid the elimination of this loan, ”Nutzci explained.
He added that the potential elimination of such an impressive debt position can even more shake the market.
Long before the liquidity crisis, information appeared that the SEC is investigated by the activities of Celsius Network and other similar platforms – Gemini and Voyager – on the legality of providing interest on deposits in digital assets.
In April 2022, Celsius suspended interest payments for Earn for new customers from the USA. Thus, under the pressure of regulators, a significant part of the client base could be lost.
In June, against the backdrop of a new round of problems, the financial regulators of the five American states in a priority order began an investigation into the freezing of Celsius accounts.
Three Arrows Capital and Terra echoes
A few months before the collapse of Terra, the non -profit organization Luna Foundation Guard attracted $ 1 billion. Among the large buyers of Luna token was the cryptocurrency hedge fund Three Arrows Capital (3AC), who headed the tokensil along with Jump Crypto.
In June, Peckshield analysts drew attention to large swaps that produced wallets allegedly related to Three Arrows Capital. Two transactions were made by the exchange of more than 56,000 steth for ETH.
In a conversation with Coindesk, Nansen analyst Andrew Turman noted that during May the hedge fund led ETH and STETH from Curve for a total of about $ 400 million.
Rumors of insolvency 3AC crawled on the network. June 15, co -founder of Su Zhu wrote the following:
“We are in the process of communication with the corresponding parties and are completely committed to solving this problem.”.
Some community participants suggested that 3AC is located similar to the Celsius situation.
The trader under the nickname Moonoverlord called Three Arrows Capital the “largest dumper” Steth. He drew attention to the fact that the founders of the structure kept silence for several days, Zhu removed from the description of the profile on Twitter the mention of any cryptocurrencies and removed the account on Instagram, and the company itself “dropped 30,000 steth and reduced all positions in AAVE”.
The analyst under the nickname Onchainwizard said that the address marked by the Nansen service as associated with 3ac “aggressively” pays the AAVE loan. According to the observations of EthHub co-founder Anthony Sassano, the liquidation price of Ethereum for the hedge fund position for $ 245 million is $ 1034.
The following graph shows that for a long time the price parity with Steth and ETH was relatively stable. The balance was shaken against the background of Terra collapse in early May.
“The collapse of Luna and UST, of course, caused fear and provoked the pressure of sales on the market. People have lost confidence, and the price of Steth went down, ”said Huobi Research analysts.
Participants in the crypto community noted that on June 8, about 50,000 Steth expected Alameda Research.
For retail investors, the only real exit from the STETH is Curve, whose pool is reduced by 10,000-15,000 ETH per day. While maintaining the pace, it will be devastated for two weeks.
The pressure on the price of the STETH is largely due to the fact that users will be able to bring ETH to Beacon Chain only some time after the merger https://gagarin.news/news/binance-leaked-sensitive-data-to-russian-authorities/ of the POW and POS algorithms). This upgrade is expected in August, according to optimistic forecasts.
On the other hand, there are serious risks associated with the use of Steth in complex strategies. For example:
- Users can place Steth in AAVE to attract ETH under their security;
- Enter eth borrowed to Lido to get steth again. D.
Blocking such operations creates an analogue of the credit shoulder in landing protocols.
“This is a big risk for steth and eth. A further decrease in the cost of Steth will entail a chain of liquidations of positions with Leverida, ”said Huobi Research researchers.
Subject to liquidation is implemented in secondary markets, exerting even more pressure on asset prices.
Based on the current situation, the experts made several conclusions:
- In the short term, the STETH will face significant sales pressure. Turbulence in the markets will remain in the near future.
- The discount can spur the demand for “stakeing ether”. The cheaper the price of the STETH, the more profits can get arbitrators when it is possible to withdraw ETH from a deposit contract.
- As it approaches the activation of The Merge, the price will most likely be restored. However, if technical problems arise during an upgrade, investors will lose confidence in the project. This will become an additional factor in the pressure of the STETH price with the consequences in the form of liquidations of landing positions.
With competent risk management, high-risk strategies are good in growing markets, but is unlikely to be justified during periods of decline and turbulence. The situation with Celsius and other large crypton platforms emphasizes the need for thoughtful risk management and thorough selection of projects.
The prevailing problems are still far from resolution. They revealed the vulnerabilities of the Defi Ecosystem, which, as it turned out, can be affected by large centralized platforms.
Many users of landing protocols use positions with Leverid. This is fraught with massive liquidations that accelerate the drop in asset prices.
It is believed that macroeconomic conditions affected the cryptocurrency, not the problems of Celsius. Against the backdrop of tightening the Fed’s policy and even just expectations of raising a key rate, many investors try to get rid of high -risk assets. In such conditions, the liquidity of many tokens is reduced, including steth, making their prices more sensitive to “whale” sales.
In the short term, the situation remains a shack. However, it is possible that Bitcoin and Ethereum have already approached the bottom, and the long -awaited upgrade of The Merge will return the belief of investors to the cryptocurrency market and serve as a driver to restore.
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