Crypto: Celsius liquidations could be significant

A few days ago Celsius received permission from the bankruptcy judge to convert the crypto assets still held in Bitcoin and Ethereum.

Specifically, starting on 1 July, it began the process of selling all clients’ altcoins, except those in Custody and Withhold accounts, in exchange for BTC and ETH.

As of 5 July, transactions have already taken place that are part of this process.

Celsius: the crypto conversion process.

As things stand, it is not publicly known when this process will be finished, nor is it known exactly how many altcoins will be sold.

All that is known is that the process was kicked off on 1 July, and that as of 5 July some sales had already been made.

It is worth mentioning that the company, or what is left of it, is now being managed by a bankruptcy trustee, and not by the old owners or directors who took it all the way to bankruptcy.

The goal of the new management is only one: to try to raise as many funds as possible in order to be able to return them to all creditors, primarily the customers who to date have lost everything they had on deposit with them.

It is worth noting that these credits are calculated in fiat currency, while many assets still on hand are in crypto. In the past, this thing has helped some bankrupt companies to recover funds in fiat currency to distribute to creditors over the years.

The idea behind this is probably to reduce risk by getting rid of higher-risk assets and instead increase in the portfolio those that are more likely to increase in value in the future in the markets.

The impact on altcoin markets

According to some, this process could have an impact on altcoin markets, particularly by increasing selling pressure.

For example, according to crypto analytics firm Kaiko, the impact could be significant.

While there is inadequate information to be able to estimate this, the liquidity of these tokens over the past year has declined significantly, with the aggregate market depth of altcoins still owned by Celsius dropping 40% since 2022.

Kaiko estimates that this market depth is currently only $90 million, but according to documents filed by the company in court, Celsius would have much more than $90 million in altcoins.

Therefore, the analyst firm believes that it will be very difficult for Celsius to liquidate its altcoins without causing prices to fall.

The problem surrounding the Celsius (CEL) crypto

The main problem concerns the CEL token issued by Celsius in 2018.

Even though its current market value is already at -98% from the highs of 2021, and is below the pre-bubble levels of late 2020 as well, the company still holds it in large quantities, but the market depth is hardly there.

According to Kaiko, CEL’s market depth has collapsed to just $30,000, concentrated mainly on OKX and Bybit.

Celsius, at current prices, would still turn out to hold as much as $240 million in CEL, even more than the market capitalization. It is necessary to keep in mind that the total supply of CEL is nearly 700 million tokens, while the actual circulating supply is just over 400.

If indeed Celsius were to decide to sell all the CEL tokens it owns on the market it could practically send its price to zero, and at some point it would find no one willing to buy them.

But the fate of the CEL token has long been given up for dead for some time now, so any total implosion of it would not upset the crypto markets much.

The other altcoins

Kaiko also pointed out which altcoins Celsius still has in its coffers

In addition to CEL, the most prominent are BNB, ADA (Cardano), SOL (Solana), and MATIC (Polygon), but also DOT (Polkadot), LTC (Litecoin), BCH (Bitcoin Cash), UNI (Uniswap), AAVE, LINK (Chainlink), XLM (Stellar), and EOS.

Of these, however, some appear to be held in minimal quantities, such as SOL, UNI, ADA, BNB, BCH, LTC, AAVE, DOT, XLM, and EOS.

Instead, they might have larger quantities of primarily MATIC and LINK, so in theory it could be these two that suffer the most from the conversion process.

What’s more, MATIC (Polygon) is already declining on its own, down -3% since the beginning of the year, although in the last month it has been up +21%. By June, however, the price had fallen as low as $0.6, down from $0.75 at the beginning of the year, and the $1.2 touched in early November 2022.

LINK (Chainlink) is up +9% since the beginning of the year, with +19% in the last thirty days. However, in June it had fallen to $5.2, down from $5.5 at the beginning of the year and $8.1 at the beginning of November 2022.

It is therefore possible that on these two cryptocurrencies in particular, the impact could be significant, although not as much as on the CEL token.

On the other hand, it is unclear how heavy the impact may be on altcoins that it holds in limited quantities, but some of these have not performed very well recently (see for example BNB and ADA) and may suffer again.