Sustainable banking is a very simple concept: Operate in a way that works now, and will still work in 1000 years.
Celsius is designed to work in a way that is viable in any market condition, which they have more than proven by soaring from $0, to over $4.250,000,000 (4.25 billion) USD worth of coin loan originations in their first year of operation. These loans are mostly short-term loans, they are often closed after no more than 2 weeks, and they are collateralized up to 150% which is more than enough for such a short period of time. Celsius lends these coins mostly to professional customers such as hedge funds, exchanges and institutional traders which reduces risk. Sustainable.
Celsius does not use leverage. In fact, they do the opposite since loans are collateralized. For example, if they lend out $1,000,000 worth of BTC, and get a $1,500,000 USD bank deposit as collateral, that makes the leverage 0.66x. Sustainable.
Celsius does not have fixed rates. Now, we know that that may sound off-putting, but it makes sense. By not having fixed rates, Celsius has the flexibility of paying only however much they can afford to pay. Did they earn a lot last week? Rates go up! Did they earn a little last week? Rates go down, but at least the company won’t. So far, in a year of operation, the average rate on most coins seems to be about 4-5% which is still much better than any savings account, not to mention stablecoins at a solid 8.3%. Sustainable.
Hold up, they’re paying 8.3% on stablecoins while the lowest rate on fiat loans is 3.465%? That’s not sustainable, busted! ..or is it? Yes, it is, though it may not seem like it at first glance. When you take a loan from Celsius, a part of your balance is locked as collateral to back the loan, this ranges from 200% to 500% collateralization, so Celsius always has far more value in coins than what they lent out. While you have an active loan, you do not earn interest on the collateral used for that loan, so that is a (potentially) large amount of coins Celsius doesn’t have to pay interest on. This allows them to offer loans at such a low rate, and pay such a high rate on stablecoins at the same time. Sustainable.
And finally, what is Celsius their long term strategy? Alex has said “If Celsius doesn’t outlive me, I wouldn’t consider it a success.”, he intends for Celsius to still be around in 50+ years, rather than just 5 months. This means that Celsius is playing it safe, doing their best to do everything by the book, being very careful with what features and services they offer in each country, and so many other things behind the scenes that we probably never hear about. All these restrictions and limitations are frustrating right now, but we can’t be mad at them for doing what’s best for the company long term, which is ultimately also in the best interest of their community.