A Heated Update on Celsius Insolvency
Market Meditations | July 5, 2022
Celsius, a centralised crypto-staking platform, has recently become an infamous household name. On June 12th, the firm suddenly froze all withdrawals and transfers on its platform due to fears of insolvency, leaving 1.7 million users unable to redeem their assets.
- Issues began to arise due to “extreme market conditions” initiated by the collapse of Terra LUNA, and fears of Celsius being insolvent caused further panic.
- As of May 2022, Celsius had lent out more than $8 billion to clients and, at its peak, had $12 billion in assets under management.
- According to an official blog announcement on June 30th, Celsius had begun exploring options to “preserve and protect assets” following insolvency issues.
- Celsius states that these actions included “pursuing strategic transactions” and “restructuring its liabilities”, among other strategies.
- Earlier this week, FTX pulled out of a potential deal to acquire Celsius after finding a $2 billion hole in the firm’s balance sheet.
Celsius seems to be moving in the right direction, as they were able to pay another $120 million towards its Bitcoin loan on Maker protocol.
- After this payment, its new liquidation price on the position sits at $4,966.
- By paying this debt, Celsius has significantly de-risked its risk of liquidation.
- According to Zapper’s data, Celsius still owes $82 million to Maker, $100 million to Compound and $175 million to Aave.
Tip: In DeFi, liquidations occur when traders cannot repay their loans on time, and the protocols automatically sell their collateralised assets.
