Ethereum price fell 40% in one month… Celcius withdrawals have been halted, Experts. Worrying about liquidity slowdown due to the popularity of products that receive interest by leaving Ethereum. “This drop will affect all virtual assets… Similar products may collapse one after another.”
Ethereum (ETH), known as a cryptocurrency giant along with Bitcoin, is falling endlessly, plunging nearly 40% in one month. As Ethereum-based derivatives were shaken as the Ponzi nature (blocking) nature was revealed, the value of Ethereum was also affected. The industry is concerned that this situation could lead to a ‘coin collapse from Ethereum’.
According to CoinMarketCap on the 14th, the price of Ethereum traded at $1,197.66, down 17.86% from the previous day as of 8:23 a.m. on the same day. Ethereum price traded at around $2,000 a month ago, but has fluctuated since then and has now plummeted to around $1200. In just one month, nearly half of the value was lost.
Ethereum-based derivatives exposed their loopholes and lost investors’ trust, which was also a bad thing for Ethereum. Recently, Ethereum is preparing to upgrade from a mined coin to a non-mined coin. After the upgrade, if Ethereum holders participate in blockchain verification, the holders will be rewarded with additional Ethereum. A minimum of 32 Ethereum (about 50 million won) is required to participate.
Since it is a rather burdensome amount for individual investors to participate, products utilizing this point have also appeared. Lido came out with a ‘crowdfunding’ service for those who want to participate in Ethereum blockchain verification but lack money.
This service collects individual Ethereum and participates in blockchain verification instead, and then distributes the profits. However, until the Ethereum upgrade was finished, participants could not find the entrusted Ethereum, so Raido gave a token of stETH.
Then, this time, a service using stETH appeared. Celcius, a coin-backed loan service company, introduced a service that lends 70% of the stETH to Ethereum when entrusted with stETH. Then, some investors entrusted the Ethereum they received from Celsius back to Raido to raise the interest rate, and also entrusted the stETH received from Raido to Celsius. In this way, if you invest 100 Ether, you can earn up to 3 times the return.
The problem came as these investment methods became popular. Before launching the stETH service, Celcius has provided a service for lending other coins using Ethereum as collateral. However, recently, when the news that Celcius was lending Ether with stETH as collateral, there was a growing concern among existing investors that the Ether they had entrusted to them could not be returned. This is because if the Ethereum that Celcius had as collateral is transferred to new customers who entrusted stETH, the absolute amount of Ethereum held may decrease.
Finally, these worries led to bank runs (massive withdrawals). As anxiety has been amplified in conjunction with the recent collapse in coin value, existing users have begun to withdraw Ethereum on a large scale. Celsius, who could not stand it, eventually declared a suspension of withdrawals on the same day.
Considering the situation in which Celcius is participating in several ‘decentralized finance (DeFi) projects’, this effect may spread to the entire virtual asset market. Celsius is participating in several projects such as coin-secured loans, and if there is a problem with Ethereum payment, coins and cash invested in other projects can be withdrawn. This inevitably affects the overall coin market liquidity and price formation.