Key facts:
Celsius is one of the largest holders of the stETH token, which is awarded by the Lido staking pool.
The company is under questioning and the exit of investors is a possible scenario.
The Ethereum 2.0 staking pool, Lido, could, at some point, be involved in a downward spiral that would see its stETH token lose much of its value. So says analyst Brad Mills.
for the author of this hypothesiswho is an investor and entrepreneur in the bitcoin (BTC) ecosystem and cryptocurrencies, the investment platform Celsius could be responsible, in part, for this to happen. The reason is the large number of stETH tokens that this company owns.
Before continuing with Mills’ explanation, it is necessary to understand that stETH is the token through which Lido offers its investors the possibility of withdrawing their deposit at any time.
In Ethereum 2.0 staking, the deposited ethers (ETH) are locked in the corresponding smart contract. But this pool gives its investors a token (stETH) that maintains parity with ETH, algorithmically.
One of the largest holders of this token is Celsius. The company pays interest to those who deposit ETH in it. One of the ways you have to generate them is by staking on Lido.
Celsius has suffered a loss of confidence
Mills details that Celsius holds around 445 thousand stETH. In a panic market, in which users decide to withdraw their ETH from Celsius (as was the case with Anchor from Terra USD, in which people were influenced by the potential losses they could suffer) Celsius would be forced to sell its stETH causing the token to lose its parity with ETH.
This is because, according to Mills, only 27% of the ETH that this platform claims to have are available for withdrawal. The rest has been staking (locked until Ethereum 2.0 is finally released) and stETH.
The fear of a capital outflow from Celsius is currently quite simmering. In the midst of the Terra USD debacle, Celsius blocking withdrawal of funds from the platform. No user could request a withdrawal until further notice.
In social networks, even, it has been accused of operating as a “Ponzi scam” by disabling withdrawals from their platform. Users complain that Celsius is a “disaster” when taking this type of attitude.
His way of operating has also been questioned. Interestingly, Celsius pays more interest to investors who deposit money on the platform than the interest it charges for the loans it provides.
This general mistrust has been reflected in the price of CEL, the platform token, which, in less than 1 month, has lost more than 60% of its valuegoing from being worth more than USD 2 to just under USD 0.7 today.
Lido and its power in the Ethereum 2.0 network
Lido is the main Ethereum 2.0 Staking pool with 30% of that market. As reported in CriptoNoticias, there are those who see risks of centralization that could affect the network.
With an entity of such magnitude, the loss of parity of stETH with ETH could be very serious for the entire Ethereum ecosystem. Even if something like this happened, it could affect the entire cryptocurrency industry, as happened with the case of Terra and LUNA.