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Celsius Network Fully Pays off Maker Loan, Reclaiming $440M of Collateral


btcmanager.com 07 July 2022 16:00, UTC
Reading time: ~3 m

Celsius Network LLC, the troubled crypto lending company that made news after restricting its half-a-million users from withdrawing funds owing to the crypto market turmoil, has finally fully paid off its loan on MakerDAO.

Celsius Completely Pays off Maker Loan

Celsius Network, the crypto lender that froze user withdrawals last month due to liquidity concerns, regained $440 million of collateral on Thursday after fully repaying a loan on Maker, one of the crypto realm’s major decentralized finance (DeFi) platforms.

According to on-chain data, a wallet tied to Celsius settled the remaining $41.2 million of the debt in DAI, the Maker protocol’s stablecoin. As a result, the Maker protocol released 21,962 wrapped bitcoins (WBTC), a bitcoin-equivalent token on the Ethereum blockchain that had been offered as collateral for the loan. Considering WBTC was recently trading at around $20,400, this accounts for roughly $448 million.

The move implies a significant increase in liquidity for the ailing crypto lender’s finances. On June 12, Celsius suspended all customer withdrawals and transactions to prevent a run on deposits.

Celsius began making payments toward its Maker protocol debt earlier this month, and over the course of the last week, the company has repaid $224 million.

Loans on decentralized lending platforms like Maker are typically overcollateralized, which implies that the borrower must put up more assets in valuation as collateral than the loan itself. Repaying the loan made sense for Celsius since it enabled it to keep the valued collateral by repaying a fraction of its value.

Challenging Times for Celsius

As previously reported on June 13, Celsius halted all withdrawals and transfers between accounts on its platform owing to “extreme market conditions,” putting additional strain on the crypto industry. User money remained frozen as of press time.

According to reports, the firm provided more Bitcoin (BTC) as collateral in order to lower the price at which its position was to be liquidated, risking bankruptcy if the price of Bitcoin fell below $16.852.

Celsius stated in early July that it was actively working on measures to “preserve and protect assets,” including “pursuing strategic transactions” and “restructuring its liabilities,” among other potential options.

Documents reviewed by Wall Street Journal reporters from 2021 revealed that Celsius carried considerably more risk than a traditional bank while being promoted as less risky and having higher returns.

Meanwhile, Simon Dixon, CEO of BnkToTheFuture, issued the following warning in a tweet:

“I add that the Celsius Network community will need to apply pressure to prevent crypto assets being sold in Chapter 11 like we did in Mt. Gox. If not depositors lose & cheap Bitcoin will be scooped up at the cost of innocent misled investors. Let’s prevent that #DepositorsFirst.”

After the Maker loan repayment, Celsius’ CEL token experienced a short squeeze. Within an hour, the CEL price went up from $0.84 to $0.91. Short sellers drove the price down to 0.84 once again. Across exchanges, an average of 60% of short positions were observed.

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