If the Bitcoin price falls below $16,800, loan guarantees to Celsius will get liquidated. To avoid this situation, the company took another $530 million loan and employed it as collateral.
Due to the crude market in the crypto sector, with bitcoin (BTC) dancing at around $22,000, Celsius has decided to take precarious measures. To prevent its collateral deposited in other protocols from getting liquidated, the entity behind the lending and investment platform has deposited more wrapped bitcoin (wBTC) to add as collateral.
The plan of collateralizing bitcoin in MakerDAO (or in wBTC, a “wrapped” token of the most prominent digital asset) got repeated in recent days by Celsius. Between June 12 and 14, it attached a sum registered at 7,165 wBTC in the investment and loan protocol that permits the stable coin DAI (DAI).
One particular feature of Celsius is that its business model focuses on employing the deposits of its users in other investments, such as DeFi protocols and digital assets mining. By not being focused on the traditional scheme of loan networks, a bearish market context like the current one could bargain their solvency.
By attaching more collateral, the company could lower the BTC price that acts as the limit for liquidations from USD 17,211 to USD 16,852. The data about the position can get observed on the defiexplore.com site.
To acquire the funds employed as collateral, Celsius would have requested a loan of 23,962 wBTC from a DeFi investment platform Aave. This information came from Dylan LeClair, a member of the analytics firm UTXO Management, who shared the image of a user interface similar to that of that protocol.
The amount runs in parallel with $530.6 million, based on the wBTC quote. Subtracting the $278.5 million debt in the protocol, Celsius’s current collateral on MakerDao relies on $248.5 million.
Celsius Users’ Bitcoins Face Risks
The main struggle with the situation is that the bitcoins and other digital assets that users have deposited on this platform are at risk. Withdrawals got suspended on Sunday, June 12, as a protective measure in the face of market instability, and now these types of procedures are getting revealed to circumvent bankruptcy.
Furthermore, a liquidation by Celsius could seriously impact the market because USD 522 million equivalent in BTC would get sold, triggering the offer and lowering the digital asset price.
The Bear Market “Wears” Celsius
Until the end of 2021, Celsius achieved a flow of funds so vast that it approached at least USD 28,000 million, according to the protos.com portal. Now, with the cost of bitcoin 30% lower than a week ago at press time, the entity is making significant moves to circumvent insolvency; the funds it managed crumbled by 88% and would dance around USD 3,300 million.
By: Jenson Nuñez
