The Bull Case for Celsius Network

To put it plainly, last month was a rough one for the global crypto ecosystem. The epic crash of Luna/Terra, the brief depegging of Tether, and billions in capital outflows from crypto portfolios have led many to question the future of the industry moving forward. Celsius Network, a leading DeFi services provider that manages billions in digital assets (including a fair share of my own) and has raised nearly $1B in capital over multiple rounds, has been caught in the crossfire of the broader market hysteria. In response to a lot of the bashing I’ve been seeing about these guys in recent days, here’s my bull thesis for Celsius Network and why I think they’ll emerge from this on top.

First to push back on some of the FUD-driven narratives I’ve observed cropping up around Celsius that are, IMO, missing the point:

Decline in CEL Value doesn't equal a decline in Celsius Network's Value

The decline in the $CEL token’s value has no impact on the company’s overall valuation or ability to continue providing the services that has made it a leader in the field of crypto asset management. At the end of the day, CEL is a utility token whose primary purpose is to provide users with rewards and discounts within the Celsius ecosystem. It's a common misconception to think of token price in the same way we view a listed company’s stock price, but this type of comparison is just plain wrong. When a listed company’s stock price halves, it just lost half its value. When a utility token’s price halves, it means the purchasing power of the coin relative to others has declined, but this in no way impacts the company’s inherent value or future viability. Celsius has raised some $850M to date, and even CEL going to zero won’t change that fact.

Furthermore, CEL has been tracking a downtrend since June 2021. Though it dropped from >$2 last month to around $0.80, leading coins like BTC and ETH were also rocked as a result of high background volatility. Even so, in recent days CEL has rebounded some 60% from a low of $0.50, meaning this token still has gas in the tank for the next bull run. I see this is a market-wide phenomenon rather than being unique to CEL.

The Luna Crash

There’s been quite a bit of chatter around Nansen’s contention that the Celsius pullout from Anchor was one of the dominos that led to the Luna crash. While the analytical report notes that Celsius was one of the parties that withdrew large sums on May 8th that contributed to the depeg, it refrains from alleging foul play-a subtle but critical point. And for good reason. At the end of the day, Celsius’ primary obligation is to protect the assets of its users and community members, not LUNA holders.

The Luna/Terra protocol was flawed, Celsius saw which way the wind was blowing, and immediately initiated a risk management protocol to shield its holdings from the fallout. And as we saw, they were right to do so as LUNA became practically worthless overnight. Do Kwon’s ponzi scheme is at fault here, not the market whales that acted rapidly and strategically to hedge their own risk. The fact that Tether temporally depegged afterwards and Celsius had no hand in that whatsoever reinforces the point that we’re talking about algorithmic protocols that straight up failed, not market manipulation by bad actors. Its straightforward economic common sense that Celsius would prioritize hedging the risk of its customers over a sinking ship. Any hedge fund would have done the same.

The Upside

What I’ve just laid out are some potentially unpopular but imo important counterpoints to a lot of the FUD I’ve seen directed at Celsius since the whole stablecoin crash. And now for the upside. I’ve been doing a lot of thinking about where the crypto space goes from here after being shaken to its core through dramatic depeggings and robust capital outflows. My take is that moving forward, the industry will start consolidating around legitimate companies that provide tangible and useful goods and services rather than speculative pipe dreams.

The roaring 20s of the crypto space may be coming to an end, and in its place will be a more veteran class of blockchain financial service and tech providers like Celsius that can challenge traditional FSIB players for a greater market share. Despite the decline in CEL and notable capital outflows in recent weeks, the show goes on. They’re an industry leader in terms of asset security, and have announced plans to launch a top credit card product, staking program for leading coins, and top-shelf on-ramps for users in the US this summer. This is not the type of momentum one sees from a company on the brink of insolvency, period.

These examples are precisely the type of real products and services the DeFi space needs in order to grow sustainably and provide customers with real added-value, not all-or-nothing speculations based on failable protocols or vapid altcoins. We’ll see how the rest of the cards fall, but I still think Celsius is a central disruptor in the crypto space that is here to stay. They’ve done more to incentivize investing and responsibly storing digital assets than most big banks, not to mention other blockchain players. When the next crypto bull run takes off, Celsius customers have everything to gain so HODL tight ladies and gents because the show goes on.