The recent collapse of major crypto companies like Celsius and Three Arrows Capital has shaken investor confidence and caused prices to plummet. But while the crypto market suffers, major banks are seeing investment opportunities.
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Goldman Sachs, one of the largest investment banks in the world, is leading a $2 billion funding round for Celsius Network. This surprising move comes even as Celsius halted withdrawals and faces bankruptcy.
Overview of Celsius Network Crisis
Celsius Network is a crypto lending platform that suspended withdrawals in June 2022 due to extreme market conditions. Many experts consider its failure a catalyzing event of the 2022 crypto crash.
Celsius lured customers by offering double-digit returns for depositing cryptocurrencies. It generated yield by re-lending assets to hedge funds like Three Arrows Capital. When crypto prices crashed, borrowers defaulted on loans, leaving Celsius without funds to honor withdrawals.
The freeze on $8 billion of customer assets has prompted investigations by state securities regulators. Celsius has hired restructuring lawyers and is reportedly considering bankruptcy. The company faces a class action lawsuit alleging its business model was essentially a Ponzi scheme.
Celsius CEO Alex Mashinsky had promised users their deposits were safe shortly before freezing withdrawals. But the company admitted in court filings that it is insolvent with a $1.2 billion gap between liabilities and assets.
Goldman Sachs Leads Funding Despite Celsius Controversies
With Celsius on the brink of failure, Goldman Sachs is leading a $2 billion funding round to keep the troubled company afloat. The Wall Street bank plans to buy Celsius’ distressed assets and supply capital so it can honor withdrawal requests.
Goldman’s investment comes through its asset management arm rather than its internal funds. But it still represents a major bet on the future of Celsius and faith in the long-term crypto market.
Goldman Sachs has rapidly expanded its crypto operations, launching a cryptocurrency trading desk and bitcoin derivatives. It holds short positions on bitcoin through futures markets.
Some industry experts consider Goldman’s funding of Celsius a way to profit from the company’s downfall. By becoming a creditor, Goldman could gain company equity and assets at bargain prices if Celsius goes bankrupt.
Reasons for Funding a Risky Company
Why would Goldman Sachs pump billions into a company accused of mismanagement and potential fraud? Here are some possible motivations:
- Distressed asset purchase – Buying Celsius debt and assets cheaply could deliver huge returns if crypto rebounds. Even if Celsius fails, Goldman gains from liquidations.
- Market maker ambitions – Goldman wants to be a major crypto market maker. Owning a large platform like Celsius gives them a huge footprint.
- Faith in crypto – Goldman seems confident crypto will recover long-term. Investing in Celsius could make them a sector leader later.
- Industry consolidation – Mega banks like Goldman aim to consolidate control over crypto. Propping up Celsius helps remove competitors.
Goldman’s History of Controversy
While surprising, Goldman’s risky Celsius investment aligns with their checkered history. Here are some past examples of unethical behavior:
- Misleading clients by selling mortgage-backed securities that were designed to fail in the mid-2000s
- Engaging in insider trading and sharing nonpublic information on deals
- Manipulating commodities markets and inflating the prices of assets like oil
- Conspiring to launder billions of dollars stolen from a Malaysian wealth fund
- Routing trades through offshore shell companies to dodge taxes
- Facilitating cash transfers to dictators and oligarchs
Crypto Community Outrage Against Goldman Sachs
Goldman’s funding of Celsius despite signs of insolvency and mismanagement has enraged the crypto community. Industry leaders see it as an anti-crypto bank bailing out an irresponsible company to profit from its collapse.
Changpeng Zhao, CEO of Binance, spoke out against Goldman’s investment. He tweeted:
“Wall street bankers have been calling crypto a scam for years, until now. Their interest is not because they want to make crypto stronger, but because they want to control it.”
CoinDesk founder Shyam Seshadri expressed skepticism of Goldman’s motives:
“The timing of Goldman’s investment in Celsius is extremely suspicious. Are they really trying to help the community, or find ways to profiteer from the fallout?”
Many crypto users voiced anger about billion-dollar banks calling bitcoin a Ponzi scheme then buying up crypto companies on the brink of bankruptcy. They accuse Goldman of contributing to market crashes by shorting crypto then profiting off the downturns they create.
Impact on Crypto Market Sentiment
Goldman’s bet on Celsius could negatively impact market sentiment and prolong the ongoing crypto winter. Investors are likely to view it as Wall Street consolidating control rather than faith in crypto’s future.
The risky investment also reinforces the sleazy image of big banks trying to manipulate crypto prices for their gain. This may turn away mainstream institutional investors needed for the next bull run.
But if Goldman really does turn Celsius around and make customers whole, it could restore some faith that crypto lending can evolve into a responsible sector of traditional finance.
For now, crypto users are left wondering about Goldman’s true motives. And they are bracing for Wall Street’s deepening influence over the once decentralized world of bitcoin.
Goldman Sachs’ $2 billion investment in troubled crypto firm Celsius Network raises many questions. Does it represent Wall Street opportunism and consolidation? Or genuine faith in crypto’s future despite short-term turmoil?
The embattled lending platform now faces an uncertain path forward with input from a megabank known for unethical behavior. But Goldman’s capital could also give Celsius a second chance and crypto a much-needed reprieve.
One thing is certain – as crypto goes mainstream, Wall Street is ready to step in. That will bring institutional capital but also concentrates power in banks that many view as detrimental.
For crypto to fulfill its promise of decentralization and financial inclusion, the community may need to check the growing influence of banks like Goldman. Otherwise, crypto idealism could give way to old-world control and corruption. Hope we have clarified about Goldman Sachs 2b Celsiuswangcoindesk .