Why I’m bullish on Celsius Network and buying the CEL dip
Let’s start with who Celsius Network is.
Celsius Network is one of the leading companies in the crypto lending and borrowing space. Delivering the highest interest rates and the lowest (zero) fees, Celsius Network’s goal has been to “disrupt the financial industry, one happy user at a time, and introduce financial freedom through crypto.” They have been in business since 2017 and since the start of September, they have seen their token price skyrocket. Celsius has truly defined itself as an organization that is community-oriented and end-user focused. They do this by giving their users 80% of their generated lending revenue which translates to the highest interest rates available in the crypto lending space.
What Do They Do?
Celsius Network is a leading provider for institutional crypto lending. They pay users interest for holding crypto assets on their platform and also provide overcollateralized loans so users can leverage their crypto while HODLing. They have no minimum balance required, no withdrawal/deposit fees, and provide compounding interest on all assets held within the app automatically.
So Why am I so Bullish?
For one, their community is completely grassroots and is growing at an unbelievable rate. The most likely people to tell you about Celsius Network are not crypto influencers but their growing horde of everyday users and hardcore fans. This is critical for any crypto project that hopes to make it through the dramatic bull and bear runs crypto has seen over the last few years. Community growth and participation can truly drive staying power for any crypto project. Imagine Dogecoin’s die-hard community but instead of championing a meme, Celsius champions no-strings-attached financial independence, and individualized growth and betterment opportunities.
Not only is their community growing but the amount of crypto they are being entrusted with continues to grow as well.
Let’s take a look at a few critical crypto assets being deposited and withdrawn from the network. This will be a strong indicator of not only community growth but community participation. A lender can only be as strong and profitable as the equity that they have to offer. As you can tell from the charts below, Celsius consistently has at least 200% of their BTC and ETH deposits compared to how much has been withdrawn. And when it comes to CEL deposits, they have almost 500% more deposited than withdrawn! This shows that not only has the network grown considerably, but the amount of network participants has also grown considerably.
But What About the Token’s Utility?
Any community metrics are useless if the token’s utility doesn’t make sense or if the product doesn’t work. This is where Celsius’ flywheel comes in.
What is the “Flywheel”?
Celsius’ flywheel is a designed process to help provide CEL holders with the opportunity to participate in the growth and success of Celsius. This is one of the reasons CEL has been a top-performing token over these last few weeks and months. The value of the CEL token is derived from how many people are participating in the CEL token utility system. To simplify this, more visitors and users to Celsius means more deposits. More deposits allow Celsius to provide more loans to their customers. More loans to their customers allow Celsius to generate more interest (of which 80% they pay out to their customers). The more interest they owe their customers, the more CEL they have to buy off exchanges. This whole process increases the value of CEL by lowering the supply. Here is a link of CEO Alex Machinsky explaining the flywheel further.
Future CEL Utility — CelSwap
There also appears to be additional utility coming down the pipeline for the CEL token. On a recent AMA, they dropped the news that CelSwap will be releasing soon. CelSwap is a fork of UniSwap that will serve as an exchange for users who want to swap crypto using CEL as the base asset. From what we know so far, Celsius is also hoping to be the lowest in fees in that Dex space as well. Fees for CelSwap are rumored to be .2% as opposed to UniSwap’s .3%. It is also important to note that 80% of CelSwap fees will go to CEL token holders. Another way that Celsius makes sure to take care of their community.
How Do We Know Business is Good?
The more revenue that Celsius generates from loans, the higher interest rates they are able to pay on assets that users store. An easy way to track this is to check out the historical interest rates that Celsius has provided for each crypto asset. If Celsius were to be struggling to generate profits from their lending side of the business, users would see a definitive drop in the variable interest rates for each respective coin. Considering that Celsius just increased interest rates for users who store ETH and stablecoins is a strong sign that the lending business is doing quite well.
How Transparent Are They?
One of Celsius’ greatest strengths is their transparency. It is not often that a company provides an honest view of their performance statistics. This is where Celsius not only excels but separates itself from the crowd. Celsius goes a step farther by providing a regularly updated feed at www.celsians.com that shows,
- Community growth
- CEL’s current market depth
- Specific coin audits
- And current and historical interest rates
To put this in perspective, if you were to try and google Nexo or BlockFi statistics you would come up either empty-handed or find an “Unofficial Nexo Statistics Website” that shows unofficial lending statistics specific only to stablecoins. Typically, these sorts of statistics and insights are hidden and/or cherrypicked to show calculated growth in select specific categories. Celsius is so confidant in their product and community that they are willing to update these data on a regular basis.
What are some risks and concerns?
Accessibility to new offerings and partners:
Some of Celsius Network’s greatest risks are directly associated with their greatest strengths. Security and Caution. Many of their competitors have rushed to launch debit cards, offer credit cards, and list highly volatile fruit-based tokens. Celsius Network’s CEO, Alex Machinsky, has been very vocal during interviews and AMA’s that Celsius is and always will be overly cautious and careful when it comes to new offerings and partnerships. So if you are hoping to store and gain interest in the newest unverified crypto token like Banano, Celsius might not be the right place for you.
CEL locked up in Celsius Network’s Treasury
Another risk and concern are all of the locked-up CEL tokens that Celsius Network holds in their treasury. This portion of CEL is locked until the token reaches certain milestones. Once these milestones are met, this CEL will be distributed to employees and founders. One concern when events like this happen is that recipients will sell their tokens all at once and the price will tank. While this is definitely a valid concern, Celsius has done a great job of addressing it proactively.
- Celsius will offer its employees a financial incentive for holding their CEL for additional years and promising not to sell. This is a great way to tie their future success and sustainability to employee belief and buy-in.
- Celsius has agreed long ago to publicly disclose what direction their team takes when these tokens get released. So regardless of how much of the treasury gets released and sold, I am confident that the Celsius team will let the community know as soon as possible.
- Full transparency is one of Celsius’ primary goals so you can guess that they have already released this data in realtime at celsians.com to make sure the community is aware and informed. As you can see from the chart below, they are letting all of their community know exactly what percentage of CEL is locked up and how much is controlled by users and management.
- Celsius is also the #1 purchaser of CEL tokens in the open marketplace. Should there be a large amount of CEL tokens being sold by employees and founders, Celsius would most likely be able to buy it back (much like a stock buy-back most traditional companies perform).
- Even if Celsius decides to sell a large percentage of their treasury, it would be in their best interest to split up those sales across multiple exchanges and OTC transactions to avoid any price impact. This is undoubtedly the way in which they would go about it, so I am even less worried about this risk adversely affecting price.
Insurance Concerns
Another concern people might have is Celsius Network’s insurance model. They do not hide behind flowery language here either and are totally honest with their users. All of Celsius Network’s assets are insured by Fireblocks and PrimeTrust which means that assets not actively loaned out will be covered by either of these insurance organizations. Many people get put off when they read that, “Fireblocks and PrimeTrust, our custodians, both provide insurance on assets. However, we generate interest rewards by lending out the assets to onboarded partners. When these assets are lent out, they are not insured.” The reason this should not be a concern to users is that Celsius Network only deals in over-collateralized lending. This means that for any assets that are lent out, Celsius holds 150% of that loan’s value, just in case the loan goes sour. So for every $1000 they loan out, they are holding onto $1500. That also means that should anything happen to Celsius’ funds, they should have ample resources to recoup user losses. This does not mean you can throw caution to the wind. Even their CEO Alex constantly reminds Celsius users to be careful with their investments in the crypto space. Another example of something that would be unusual for any other company but is expected from a company as transparent as Celsius.
What does this all mean?
Celsius Network has done a tremendous job of growing its community and evolving their product. Not only has their platform grown and matured, but they have been honest and transparent with its users every step of the way. Trust and transparency are very elusive concepts in the crypto space and Celsius Network has gone out of its way to redefining both of those words, not only in the crypto world but in the financial marketplace. Combine this type of company culture with an effective product and business model and you have yourself a winning combination.
What should you do?
The first step for any crypto investor when considering a new asset should always be to do their own research and investigation. So before running to UniSwap or Switcheo to grab some CEL, make sure to do some digging yourself. The good news is, Celsius Network is so confidant in their performance, they make the good and the bad publicly available at celsians.com. This way you don’t have to bust out the abacus yourself. Alex also makes himself available every week during their regular AMA on their youtube channel so if you do have any unanswered questions, there is a forum to ask and find out. The bad news is, I don’t anticipate this dip to last very long. During the writing of this article, the price of CEL already recovered half of the 11% dip and I anticipate a quick recovery before the price continues to move upwards.
