Celsius liquidation: Crypto lending platform repays Maker loan to lower risk
Celsius, the crypto lender which halted withdrawals and was reported to have been cutting jobs, has been said to be making loan repayments to lower risks.
Blockchain data indicates that Celsius, which has been making loan repayments since mid June, has so far repaid $183m of its collateralized cryptocurrency debt to Maker.
Maker is one of the largest decentralized lending platforms. Debt was repaid in Maker protocol’s native stablecoin, DAI.
DAI to US dollar
Data also showed that one of the transactions resulted in the release from Maker of 2,000 Wrapped Bitcoin (WBTC) that had been posted as collateral.
WBTC is the compatible version of BTC for the Ethereum blockchain. It is a token with 1:1 peg to BTC, which means BTC holders can easily convert their BTC into the wrapped version and use it across the Ethereum network.
Celsius Network is a peer-to-peer platform for decentralized finance (DeFi) allowing users to borrow and lend, and trade a broad range of cryptocurrencies.
The crypto lending platform supports a broad range of digital tokens including mainstream names like BTC, ETH and MATIC.
Celsius promises an annual rate of 18% for users who deposit SNX with the lender, according to its website.
What is your sentiment on SNX/USD?
SNX to US dollar
Celsius Network is a custodial asset manager for decentralized finance opportunities, providing regulated access to loans and yield, and takes a fee for that service without exposing users to the hassle and risks of self-custodied crypto
The crypto lending platform promises withdrawals and redemptions in the event users want to exit their positions, but Celsius ultimately manages the positions on behalf of investors.
CEL has seen wild price gyrations since news of liquidity problems on the lending platform emerged, when it put a halt to withdrawals.
CEL to US dollar
Two things put Celsius Network in a sticky situation: the use of on-chain leverage and stETH (staked ether).
Celsius accesses leverage through permissionless on-chain DeFI money markets such as MakerDAO to provide users with a low borrowing rate. In other words, Celsius takes BTC and ETH deposits from users and deposits them to borrow DAI.
Maker works in the manner where you put $1.50 of volatile collateral (ETH for example) in and borrow the DAI stablecoin.
ETH to US dollar
If the value of the collateral falls below a threshold, it is liquidated to repay the loan and prevent bad debt. In short, liquidate your customers’ loans to repay your own. And crypto prices have been collapsing.
Celsius crypto offered robust yields on ETH of 8% using a derivative of ETH known as staked ETh or stETH. stETH is the brainchild of LidoFinance, and does not actually exist yet.
ETH is transitioning to a proof of stake concept, a process known as the Merge.
In simple terms, stETH is a token which will only vest once this update is complete, which according to analysts Capital.com spoke to recently it could “happen next year at best”.
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