How Does Celsius Make Money? Ways Celsius Generates Profit

“What’s in it for them?” has always been a crucial question when money is involved. Celsius Network offers one of the best interest rates among its peers, which is enough to raise questions.

Although Celsius Network holds permits from FinCEN and the American Securities and Exchange Commission, we still have to know how they make their profit. How does Celsius work? What is their business model? How does Celsius Network Make Money? Is Celsius safe?

If you’re yet to find accurate answers to these questions, join us until the end of this post. Let’s explain what is there to know about the Crypto giant’s business model.

Celsius Network Overview

Celsius Network is a mobile app-accessible democratized interest income and lending platform. It is a modern platform where membership provides access to curated financial services that are not available through traditional financial institutions.

It is built on the belief that financial services should only do what is in the community’s best interests. Crypto owners can earn interest by transferring their coins to their Celsius Wallet and borrowing USD against their crypto collateral for one of the lowest rates out there – 4.95% APR. Read more information about Celsius Network in our Celsius Review. 

Conclusion: Should You Use Celsius?

Celsius Network might claim to be community-focused—which is evidently true—they also make their own profit from their lending program. That said, their policy to return 80% of the cash generated by lending the community is also quite impressive.

What’s important is they are living up to their promises so far, which is how they remain one of the best platforms for crypto investors looking to earn high interests. Nevertheless, whether as a beginner or experienced crypto trader, always do your own research before choosing a crypto market to invest your money in. If you want to know the security measures that Celsius provides for its users, check out “Is Celsius Network Safe?” and find out how secure it is to invest with Celsius Network.

How Does Celsius Make Money?

Banks can offer interest to depositors because the money deposited is used to lend to borrowers. Borrowers must pay interest on their loans. After deducting various costs, banks offer interest to depositors in order to attract new clients and retain existing ones.

This value-generating structure is comparable to the Celsius Network model, except they are not a bank and do not accept or retain deposits. However, they do use the coins users send for their own yield-generating activities, mostly lending them to approved institutional borrowers.

This allows them to add value and earn a profit, which they then utilize to fund their operations and distribute weekly bonuses. Traditional banks in the fiat world have conditioned depositors to expect a very poor return on their money, often less than 1% per year. Celsius returns up to 80% of what they earn even before deducting any expenditures. That’s why they can offer a very high payout rate on the assets they sponsor.

The remaining 20% of the money enables them to maintain operations. Celsius has become the fastest-growing firm in crypto, with approximately $1 billion in customer assets under management, by turning the traditional banking paradigm on its head and building a customer-centric business model that acts in customers’ best interests.

On the Celsius app, they offer over 30 currencies that yield weekly compounding prizes. As of the first week of August, Bitcoin and Ethereum holders are earning returns of 4.51–6.2% and 4.55–6.2%, respectively, depending on the size of their holdings. The return for all stablecoins that Celsius support is presently 8.69–11.9 percent APY.

How Does Celsius Maintain their High Reward Rates?

Basically, they use coins transferred by their customers as collateral for lending, rehypothecation, and other similar transactions. They lend crypto to approved institutions as well as dollars and stablecoins to retail customers who want to borrow against their crypto holdings.

As an example, consider the following: Assume you have 10 BTC in your Celsius wallet. You’re currently earning up to 4.51 percent APY from them, with rewards delivered to your wallet every week. Despite its volatility, the price of BTC is steadily rising, and you have no plans to sell anytime soon.

So, you’ve put a lot of money into an asset with a lot of long-term potentials, but you now need cash — perhaps you have an unexpected bill to handle. You don’t want to sell your cryptocurrency for cash because it will be much more expensive to buy in later, not to mention the capital gains taxes you’ll have to pay if you bought in at a lower price.

Rather than selling your Bitcoin, Celsius allows you to borrow money from them while using your own coins as collateral. Their loan structure is based on secured collateral, you can borrow cash regardless of your current credit situation, without the typical loan complications traditional lenders are notorious for.

Your cost to borrow might be significantly lower than with an unsecured loan because Celsius have additional ways of making money with the collateral you pledged with. Rather than relying solely on the interest, you pay Celsius; Celsius deploys your crypto collateral using the same yield-generating lending model. This is how they can charge you interest rates as low as 1% APR on your loans.

How Can You Tell if Celsius Borrowers Will Pay Back?

Celsius Network only makes asset-backed loans, which means that every person borrowing a dollar gives them over 100% of the loan value in another asset, like cryptocurrency. However, if they do not return the loan amount or pay the interest on that loan, Celsius will use the collateral to pay down the loan.

That means coin holders will always have more collateral than total loans out. Celsius Network has never had a single default since its launch. That is because they lend responsibly and prioritize community interests.

What Collateral Does Celsius Accept?

The types of collateral Celsius Network accept periodically updated on their website. At the moment, they accept the following cryptocurrencies as collateral: ETH, BTC, XRP, LTC, and DASH.

Furthermore, before a loan is initiated, Celsius requires up to 200% of the USD loan amount to be deposited with BitGo. As a result, Celsius has more assets on deposit than loans granted at any given time, which is the polar opposite of how most banks function. Big banks are permitted to lend $10 for every $1 in deposits, implying that a bank has ten times as many loans outstanding as deposits.

Why Do Different Coins Have Different Rates?

Interest rates are computed weekly depending on three factors. They include current market conditions, coin demand, and returning 80% of earnings to the community.

This strategy ensures that Celsius Network continually offers competitive interest rates while also delivering additional interest for coins that are in higher demand. If a large institution is prepared to pay a high price for a specific currency, Celsius will share the increase in earnings with the community.

How Often are the Rates Likely to Change?

Celsius Network is upfront about the fact that their prices are liable to change at any time based on the three reasons described above. Nevertheless, substantial short-term swings are uncommon, and rates remain reasonably steady from week to week. Current prices are available at all times on the Celsius Network website, app, and social media pages.

Why Does Celsius Give 80% of Their Profit Away?

The remaining 20% of Celsius Network’s profits are reinvested in the business to pay personnel, control expenses, purchase back their CEL tokens, and scale their products and services. Do they take a little more for themselves? Most definitely, but that isn’t what Celsius Network is about.

The strength of disruption stems from widespread acceptance. Cryptocurrency and blockchain are the finest prospects prepared to build a new financial system that works for all. To attract the masses to cryptocurrencies, Celsius must be different from the banks and better.

Celsius Referral Program

How does Celsius Network make money? We have already answered that question. Now, how does Celsius Network give bonuses? If your answer is through the Celsius referral program then you are right. Referral codes are intended to bring in new customers. If someone uses your referral code to open an account and deposits $400, you will both earn $50 in BTC. To learn more about Celsius Network’s referral program or if you need a referral visit our Celsius Referral article.