Celsius, the crypto lender that halted withdrawals and is reportedly cutting jobs to stave off a liquidity crisis, has been aggressively repaying debt on one of the largest decentralised finance (DeFi) protocols– possibly to get back bitcoin-equivalent tokens posted as collateral.
Celsius has paid $183 million of its collateralized loan to Maker since July 1. Etherscan transactions confirm downpayments from a Celsius wallet. Maker’s native stablecoin, DAI, was used to repay the debt.
Following the settlements, Maker unwrapped 2,000 bitcoins, releasing $40 million in collateral. Wrapped Bitcoin (WBTC) is an Ethereum token representing bitcoin (BTC), the largest and most liquid cryptocurrency.
Celsius owes Maker 41 million DAI (about $41 million), but it has 22,000 wrapped bitcoin (about $440 million) posted against those loans. If the rest of the debt were settled, there may be an even bigger potential kicker.
Bitcoin Release could Satisfy Creditors and Customers
Celsius may be able to satisfy creditor demands and customer withdrawals by releasing collateral (Bitcoin) which they may exchange on centralised markets or over-the-counter.
Given that DeFi loans are overcollateralized, it makes sense for them to do this, as the value unlocked from paying back their loans (collateral fewer loans) is more than the value of the loans themselves (should they not repay).
Celsius representatives didn’t immediately respond to inquiries about blockchain data or transactions.
After the fall of the Terra blockchain and its UST stablecoin in May and the loss of the once-top crypto hedge fund Three Arrows Capital in June, the distressed crypto lender is rushing to defend and preserve its assets to avoid insolvency.
Celsius reportedly eliminated 150 staff and stopped withdrawals and transactions for 1.7 million users on June 12. Authorities are looking into the business.
Celsius’ Native Token Dropped 80% This Year
By May 2022, the firm had lent $8 billion to clients and managed $12 billion.
Decentralized financing platforms like Maker require borrowers to pledge more assets than the loan’s worth.
Moreover, loan paydowns reduce the price point (of wBTC) at which Maker would automatically liquidate Celsius collateral.
After payments, Celsius wBTC collateral fell to $2,722, according to DeFi Explore. WBTC now trades at $20,200, overcollateralizing the loan 1,101 percent.
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