Celsius’s Coming Storm – Temperature of $ETH & $1.0
Let us get the backstory first!
Celsius is an app where you can stake your crypto to earn rewards.
Celsius supports ETH 2.0 migration and allows people to lock in their ETH to earn staking rewards.
Now you get tokens like stETH in return of your staking so you can still trade ETH and claim 1 stETH = 1 ETH when the staking period is over.
An important point, 1 stETH is pegged to 1 ETH but is not equal to ETH, it is just a liquidity token that can be redeemed for 1 ETH when the ETH 2.0 staking period is over.
The problem comes here, as the date for ETH 2.0 is still not clear add in continuous delays and we see a storm brewing.
Celsius has used customers' ETH/stETH as collateral to take out a 1 billion dollar loan and only has about 270K ETH reserves.
As the price of eth falls people have started taking out their ETH out of celsius at an alarming rate and if this continues Celsius will be forced to sell stETH
This will be in such large quantity that the stETH might become depegged from ETH.
We are already seeing it show signs of panic and depegging.
This shouldn't affect the price of ETH much but if you hold and stETH be cautious!