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Celsius has fully paid off its MakerDAO debt, unlocking nearly $456 million worth of wrapped Bitcoin. It is facing a $1 billion loss on its MakerDAO lending strategy.
$41 million to Free Up $456 million
According to Etherscan data, a wallet identified as belonging to Celsius paid off a $41 million debt in DAI today, freeing 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 allows users to mint the DAI stablecoin when they deposit collateral. Celsius is a “CeDeFi” platform that operates as a middleman for customers, leveraging opportunities found on DeFi protocols like MakerDAO. Following Terra’s collapse, a market downturn, and the demise of crypto hedge firm Three Arrows Capital, Celsius and several other major crypto lenders have faced significant liquidity concerns in recent weeks.
While the Celsius wallet was no longer at severe risk of liquidation after its full repayment (Bitcoin would have had to hit around $2,722 to trigger a liquidation), data from DeFi Explore showed that a $700 Bitcoin move on May 12 could have liquidated the vault. Celsius increased the collateralisation ratio and avoided a liquidation by adding more wBTC and DAI.
Over time, the total value added to the vault was $1.8 billion, while the total value retrieved was approximately $757 million. This is because Celsius was obligated to continue repaying DAI to avoid liquidation, and Bitcoin’s price has also plummeted since it opened the vault. Celsius would incur an almost $1 billion loss on its MakerDAO lending strategy if it sold its wBTC today. Interestingly, Celsius sent 24,462.6 wBTC to crypto-exchange FTX shortly after it was unlocked.Celsius controversially suspended customer withdrawals last month in order to “better position itself to honour, over time, its withdrawal obligations,” and it has since hired consultants to help it deal with potential insolvency. It’s now under investigation by the Securities and Exchange Commission as well as regulators from four different U.S. states.