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Celsius Network: Bankruptcy Imminent?



 This is certainly not how the makers of Celsius imagined it! The network could lose around $500 million in assets. The second largest DeFi position on MakerDAO will be liquidated at a bitcoin price of around $17,500.


The events around Celsius over the last few days could be described as earthquakes. Apart from the fact that users can no longer withdraw money from the network, even the Nuri company is right in the middle of the action.


But now it gets even worse: The second largest loan position Celsius could probably be liquidated shortly.


On MakerDAO, Celsius has borrowed a total of 278 million stablecoins from DAI. 2.5 times as much as the second largest lender Nexo , which made an offer to take over Celsius. Around 18,000 bitcoins are used as collateral for the 278 million DAI borrowed – an equivalent of 480 million US dollars.


What's the problem, isn't it enough?


Celsius Network is having trouble with credit

Not quite! At a Bitcoin price of $22,500, the ENTIRE position would have been liquidated , which was narrowly avoided. Such positions are extremely risky as taking out a loan is just a snapshot of the collateral. If the price of the security (in this case BTC) changes, either more security has to be deposited or debts have to be repaid.


Celsius had to withdraw bitcoin from other exchanges to add it to the already existing security on MakerDAO. Specifically, it should be 1,501 BTC. Through this process, those responsible were able to push the liquidation price down to around $17,000 per BTC.



It may sound like a lot, but in view of the difficult market situation it is quite conceivable. In addition, Celsius Network cannot deposit unlimited BTC as collateral, as the platform also holds loans with other lending protocols.


After the transfer of the 1,500 BTC, it is said that 500 BTC were deposited again on MakerDAO. These transactions flowed from the FTX account Celsius to Maker.


Can Celsius avoid bankruptcy?

The liquidation of the approximately 280 million DAI would probably mean the end for the network. With the addition of Bitcoin , the security on Maker adds up to $545 million. Close behind is security on Aave's platform at $595 million. After all, there are still 441 million in security on Compound, but “only” 225 million in credit.


Some users are already alluding to the bankruptcy of the network:


In the meantime, it has also become known that the German company Nuri invested through Celsius . The Bitcoin pool is affected, the one through which customers received interest through BTC deposits. No deposits or withdrawals from the pool are currently possible.


How much price drop can the network still absorb?

According to the current status, $17,000 would probably end the fun. Whether Celsius could shoot again is currently in the stars. A user on Twitter states that there are still around 1.5 billion user funds stored on Celsius – plus the 100 million US dollars that Tether recently invested in the network


If it were up to competitor Nexo, some of Celsius ' assets would already be owned by the company. Two days ago, Nexo posted an offer on Twitter to take over all remaining assets. According to the company, there is enough liquidity to take all positions. So far, however, Celsius has declined.


It will become clear in the coming days whether the offer will not have to be used in the future. Depending on whether the crypto market calms down or not. The Celsius token could definitely use some positive news. The token is priced at $0.32, as low as it was in summer 2020.


Disclaimer

All information contained on our website has been researched to the best of our knowledge and belief. The journalistic contributions are for general information purposes only. Any action that the reader takes based on the information found on our website is entirely at their own risk.

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