5 Risks to Know Before Using Centralized Crypto Lending Platforms
Crypto lending has been one of the most prominent activities in crypto markets. The activity has developed over the years with several crypto lenders emerging to meet the demand for crypto loans.
Centralized crypto lending platforms (CeFi), such BlockFi, Celsius, and Nexo, offer high-yield products to users. By depositing crypto funds into these products, users receive high-interest payments. However, with recent turbulence in the crypto markets and challenges in their business models, centralized platforms are contending with problems that highlight the riskiness of depositing funds in crypto lending apps.
Celsius is the latest example. The crypto lending platform recently announced it would suspend all customer withdrawals for users. This has fueled controversy in an already battered crypto market.
In the interest of protecting your funds, you will learn what risks you should evaluate before using centralized crypto lending platforms.
Amid wider market instability affecting crypto markets, Celsius announced on June 12, 2022, a pause on all customer withdrawals, swaps, and transfers between accounts citing extreme market conditions and the need to balance liquidity.
The immediate result was the plummeting of Celsius’ native token, CEL, by over 70% within 24 hours. This was against the backdrop of a giant crypto selloff that saw the total market capitalization drop to below USD 1trn. (However, since then, CEL erased all its losses and is now trading substantially higher than before the crash.)
Celsius is one of the largest crypto lenders with reportedly close to two million users from all over the world. In November 2021, the crypto lender was valued at over USD 3bn after raising USD 750m in a funding round.
Celsius
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