- Celsius creditors have received a warning about a potential “rug pull” if Bitcoin and Ethereum reach certain price points
- Similar to the MtGox incident in 2017, the increasing value of company-held assets could be used to settle USD claims, retaining other assets
- Creditors are urging swift crypto payouts to preempt the bankruptcy court from ordering such payouts at elevated asset valuations.
Celsius creditors have been warned of a potential “rug pull” if Bitcoin and Ethereum reach certain price points. In a situation similar to that which affected MtGox creditors in 2017, the increasing value of the assets held by the company and reserved for creditors means that the appreciated prices could be used to “pay off our $USD claims & keep all other assets.” Creditors are therefore urging that the promised crypto payouts be made before these levels are met to prevent the bankruptcy court from ordering such a payout.
$55,000 Bitcoin Could Spell Trouble
Celsius filed for bankruptcy in June 2022 owing $1.2 billion, with the company announcing that it was exiting bankruptcy last month. The potential for a “rug pull” was referenced back in July by Simon Dixon, CEO of BankToTheFuture, a major Celsius investor, who mentioned that the firm would be able to “rug pull all creditors” if Bitcoin reaches $54,879 per coin and if ETH reaches $3,750:
I was asked in my Space what price of #Bitcoin & $ETH would allow #Celsius & the bankruptcy code to rug pull us by using #BTC & $ETH price appreciation to pay off our $USD claims & keep all other assets.
— Simon Dixon (@SimonDixonTwitt) July 19, 2023
Back in July these sorts of prices were pie in the sky, but, with Bitcoin hitting $44,000, they present a very real possibility, bringing another of Dixon’s comments into sharp relief:
It is very important that we get out of Chapter 11 before Bitcoin & ETH approach these numbers to avoid another rug pull that we will need to fight hard against if it comes up.
Were Bitcoin and Ethereum to hit those prices, creditors could be made whole with either a cash sale or less crypto, leaving them worse off if the bull run continues.
Echoes of MtGox
The situation echoes what happened with MtGox; the exchange imploded in 2014, but when the crypto market recovered and went exponentially crazy in 2017, creditors were faced with the possibility of having their money paid out in cash once the dollar value was met and billions of dollars worth of bitcoin staying with MtGox’s parent company, rather than going back to creditors.
Eventually, the company went into civil rehabilitation, removing that possibility.
Celsius Investors Warned of “Rug Pull” Following Crypto Rise
Celsius Network, a popular cryptocurrency lending and borrowing platform, has been in the spotlight recently due to concerns about a potential “rug pull.” A rug pull occurs when a project’s developers suddenly abandon the project, taking with them the funds invested by the community. In the case of Celsius Network, some investors have expressed concerns about the platform’s potential vulnerability to such a scenario, particularly in light of the recent surge in the value of cryptocurrencies. As a result, many investors are closely monitoring the situation and considering their options.
What Is Celsius Network?
Celsius Network is a decentralized finance (DeFi) platform that allows users to earn interest on their cryptocurrency holdings. The platform offers competitive interest rates on a variety of digital assets, making it an attractive option for investors looking to maximize their returns. In addition to earning interest, users can also borrow against their cryptocurrency holdings, providing them with access to liquidity without having to sell their assets.
Why Are Investors Concerned?
The recent surge in the value of cryptocurrencies has led to increased scrutiny of DeFi platforms like Celsius Network. Many investors are worried that the rapid growth of the crypto market could make platforms like Celsius vulnerable to potential rug pulls. Additionally, there have been reports of regulatory crackdowns on DeFi platforms in various jurisdictions, further heightening concerns about the safety and security of these platforms.
Furthermore, some investors have raised questions about the transparency and accountability of Celsius Network, particularly with regard to the platform’s governance and decision-making processes. As a result, many investors are seeking more information about the platform’s internal operations and risk management practices.
How to Protect Your Investment
If you are a Celsius Network investor, it is important to take steps to protect your investment and minimize your exposure to potential risks. Here are some practical tips to help you safeguard your assets:
Diversify your holdings: Consider spreading your cryptocurrency holdings across multiple platforms and assets to reduce your reliance on any single investment.
Do your due diligence: Take the time to research Celsius Network and its competitors to gain a better understanding of the platform’s strengths and weaknesses.
Stay informed: Keep abreast of the latest news and developments in the crypto market, as well as any regulatory changes that may impact DeFi platforms.
Consider professional advice: If you are unsure about how to navigate the crypto market, consider seeking advice from a financial advisor or investment professional.
Remember that investing in cryptocurrency carries inherent risks, and it is important to approach your investments with caution and prudence.
The Future of DeFi
Despite the concerns surrounding Celsius Network and other DeFi platforms, the future of decentralized finance remains promising. Many experts believe that DeFi has the potential to revolutionize traditional financial systems, providing greater accessibility and inclusivity for users around the world. As the industry continues to evolve, it is likely that we will see improvements in security, governance, and transparency, which will help to ensure the long-term viability of DeFi platforms.
Ultimately, it is important for investors to stay informed, stay vigilant, and make informed decisions about their crypto investments. By taking a proactive and cautious approach, investors can minimize their exposure to potential risks and maximize their chances of success in the crypto market.
In conclusion, while there are valid concerns about the potential for a rug pull at Celsius Network and other DeFi platforms, the future of decentralized finance remains bright. By staying informed and taking a proactive approach to risk management, investors can navigate the crypto market with confidence and resilience.
In the meantime, it is crucial for investors to monitor the situation at Celsius Network and other DeFi platforms, and to be prepared to take appropriate action to protect their investments. Whether this involves diversifying holdings, seeking professional advice, or simply staying up to date with the latest news, proactive risk management is key to navigating the complexities of the crypto market.