Celsius pays off loan to MakerDao worth approx $456 million.
Celsius has fully paid off its debt to MakerDAO, unlocking about $456 million worth of wrapped Bitcoin. It is suffering from a potential $1 billion loss on its MakerDAO lending strategy. Etherscan data shows that a wallet identified as belonging to the struggling crypto lending company fully repaid a $41 million debt in DAI today to free its collateral of 21,962 wBTC (worth around $456 million at press time). The wallet closed the MakerDAO vault shortly after paying off the debt.
MakerDAO is a DeFi protocol that lets users mint the DAI stablecoin when they deposit collateral. Celsius is a so-called “CeDeFi” platform that acts as an intermediary for customers, leveraging opportunities found on DeFi protocols like MakerDAO. Celsius and several other major crypto lenders have suffered from major liquidity issues in recent weeks following Terra’s collapse, a downturn in the market, and the crypto hedge fund Three Arrows Capital’s wipeout.
While the Celsius wallet was no longer at severe risk of liquidation by the time full repayment was made (Bitcoin would have had to hit around $2,722 to trigger a liquidation), data from DeFi Explore shows that on May 12 a $700 Bitcoin move could have liquidated the vault. Celsius added wBTC and DAI on multiple occasions following May 12 in order to increase the collateralization ratio and prevent a liquidation.
The total value added to the vault over time was $1.8 billion, while the total value retrieved was about $757 million. This is because Celsius was forced to keep repaying DAI to avoid a liquidation, and Bitcoin has also dropped in price since it opened the vault. If Celsius sold its wBTC today, it would book an almost $1 billion loss on its MakerDAO lending strategy. Interestingly, Celsius transferred 24,462.6 wBTC to crypto exchange FTX shortly after it was unlocked.
Celsius controversially paused customer withdrawals last month in order to put itself “in a better position to honor, over time, its withdrawal obligations.” It has since hired advisors to help it deal with potential bankruptcy. It’s now under investigation by the Securities and Exchange Commission as well as regulators from four different U.S. states.
Celsius Network has completely paid off its Bitcoin loan and thus resetting its liquidation price back to zero. According to DeFiExplore.com, Celsius Network paid a total of 41.2 million DAI to close its loan from the Maker protocol and retrieve 21,962 Wrapped Bitcoin (BTC) as collateral.
Celsius Network has been making payments on its Bitcoin loan since June 14th and immediately after it paused withdrawals on June 13th.
In addition, it can be observed that Celsius had previously been adding more collateral to its loan from mid-May and after the crypto markets were shaken by UST’s collapse.
Celsius Network clearing its loan could open the doors to a complete or partial resumption of withdrawals on the lending platform. The move could also be part of Celsius’ restructuring plans after it recently let go of 25% of its workforce.
A recovery plan has already been proposed by the team at Bnk to The Future Capital, which had earlier been engaged by Celsius to manage the community part of its $750 million Series B funding round. The restructuring plan consists of three proposals:
A restructuring of Celsius Network and allow depositors to benefit from any form of recovery through financial engineering.
A pool of Bitcoin whales to co-invest with the community in a manner similar to how Bitfinex handled its 2016 hack.
An operational plan that allows a new entity and team to rebuild and make depositors whole.
Bnk To The Future Capital founder and CEO Simon Dixon has continually stressed on Twitter the importance of a ‘depositors first’ approach in sorting out the issues at Celsius Network. In one of his most recent Twitter updates, he stressed that Celsius Network needed to avoid filing for bankruptcy like Mt. Gox did back in 2014. did. He explained: Now seeing what the next steps will be for Celsius is being watched by all in the cryptocurrency markets.
