Celsius Network paid off $120 million towards its Bitcoin loan on Maker Protocol in the last 24 hours. Celsius faced a major liquidity crisis which led them to take a loan from the leading lending platform. The centralized lending platform borrowed a loan in Wrapped Bitcoin from Maker as collateral.
Celsius derisked a potential event of forced liquidation by paying off their debt to Maker. Essentially if an individual or institution is unable to repay a loan on time, the decentralized lending protocol automatically sells off the collateral.
According to DeFiExplore, Celsius could have faced an amplified risk given the fact that Bitcoin has dipped to an all-time low owing to the crypto crash. This could have resulted in Celcius facing a major liquidation problem as their collateral’s value could have dropped below their loan amount.
According to data on-chain, Celsius owes $82 million to Maker, $100 million to Compound, and $175 million to Aave. Despite Celsius making advancements their debt numbers look disturbing. In recent light, the network had also halted withdrawals which put the protocol under the radar.
Additional Reading: Crypto Firm Celsius Pauses all Withdrawals
Source: The Block
A brief background about Celsius Network
Celsius Network is a Defi platform built with a vision of financial freedom for all through crypto. On the platform, crypto holders can earn interest by transferring their coins to their Celsius Wallet and borrowers can earn a decent passive income by lending their crypto assets.
A memo was published just after the network paused withdrawals. It stated,
We understand that this news is difficult, but we believe that our decision to pause withdrawals, Swap, and transfers between accounts is the most responsible action we can take to protect our community. We are working with a singular focus: to protect and preserve assets to meet our obligations to customers. Our ultimate objective is stabilizing liquidity and restoring withdrawals, Swap, and transfers between accounts as quickly as possible. There is a lot of work ahead as we consider various options, this process will take time, and there may be delays.’
The crypto carnage continues: The network reportedly laid off 150 employees.
Celsius reportedly laid off 150 employees in Israel. According to a media source, the network had hired employee reconstructing consultants and lawyers owing to the ongoing financial crisis. This news broke just days after the network had to pause withdrawals due to extreme market low-down fear and rumours of the network’s insolvency.
It’s tragic for a network that came into existence in 2017 and had a grand 2021 after they received a funding of 750 million USD at a market valuation of some USD 3 billion. The network had processed USD 8.2 billion worth of loans as of May this year, with USD 11.8 billion of assets under its control.
Statements by Celsius Network on the debacle
According to the firm the withdrawal pressures have been causing discomfort. A spokesperson from the firm quoted, ‘’“important steps to preserve and protect assets and explore options available to us.”
Celsius further added, “pursuing strategic transactions as well as a restructuring of our liabilities, among other avenues.” The network also made a comment that it is working as quickly as possible to stabilize liquidity and operations.
Source: Crypto News.com
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