The press release from Cake DeFi was interesting to read yesterday, and one that got me thinking. Released in the wake of the Celsius meltdown, the crypto-lending platform that has suspended withdrawals and may or may not be entirely insolvent, the release from Cake DeFi dropped at a time of complete and utter chaos in the markets, sparked by the brief but damning below tweet from Celsius.
.@CelsiusNetwork is pausing all withdrawals, Swap, and transfers between accounts. Acting in the interest of our community is our top priority. Our operations continue and we will continue to share information with the community. More here: https://t.co/CvjORUICs2
— Celsius (@CelsiusNetwork) June 13, 2022
Contagion
Titled “What Sets Us Apart From Our Competitors: Why Cake DeFi Is Built On Transparency”, Cake DeFi’s post confirms that the Celsius spiral will cause no harm to Cake. It also outlines the differences between the two models. It’s a smart move by Cake, and one that I think a lot of firms would benefit from imitating.
The contagion of the Celsius debacle could be huge, and that will send fear through any crypto investor, regardless of what protocol or tokens they are exposed to. Celsius had $12 billion of customer funds and is currently clinging (desperately) onto a position on MakerDAO with half a billion worth of Bitcoin. At time of writing, a 25% drop in Bitcoin’s price would mean a total liquidation of the position and all that Bitcoin flooding the market, only adding to the contagion.
Of course, Bitcoin itself has plunged from up around $30,000 to $22,300 amid this crisis, and the very crisis itself was likely caused by contagion effects from the UST spiral last month, as Celsius were invested in the Anchor Protocol via the now-collapsed UST. So, with Cake DeFi coming out and confirming that “first and foremost, we want to reassure our customers that the current market conditions have little or no impact on Cake’s daily business. As usual, we…
