Celsius Repays $183M on DeFi Protocol Maker, Gets Back Collateral, Blockchain Data Shows

The troubled crypto lender paid down $183 million of its debt to the decentralized lending protocol Maker, blockchain data shows, possibly in a bid to recover bitcoin-linked collateral that otherwise would remain trapped.

AccessTimeIconJul 5, 2022 at 10:56 p.m. UTC
Updated May 11, 2023 at 6:13 p.m. UTC

Celsius, the crypto lender that has halted withdrawals and is reportedly cutting jobs to stave off a liquidity crisis, has been aggressively repaying debt on one of the largest decentralized finance (DeFi) protocols, blockchain data shows – possibly to get back bitcoin-equivalent tokens that had been posted on the platform as collateral.

Since July 1, according to the on-chain data, Celsius has paid down $183 million of its collateralized debt to Maker, one of the largest decentralized lending platforms. Transactions on the blockchain data tracker Etherscan verify the downpayments originated from a wallet linked to Celsius. The debt was repaid in the Maker protocol's native stablecoin, DAI.

The transactions resulted in not only the extinguishment of the debt but the release from Maker of 2,000 wrapped bitcoin (worth $40 million) that had been posted as collateral, the data shows. Wrapped bitcoin (WBTC) is a token configured for the Ethereum blockchain that represents bitcoin (BTC) – the largest cryptocurrency by market cap and thus one of the most liquid.

Celsius still owes 41 million DAI (about $41 million worth) in loans to Maker, but it has about 22,000 wrapped bitcoin (about $440 million worth) posted against those loans – so there could be an even bigger potential kicker if the rest of the debt were repaid.

“By repaying the debt, Celsius is possibly freeing up collateral (BTC) that then can be sold on centralized exchanges or via over-the-counter to meet creditor demands and customer withdrawals,” Fundstrat analyst Walter Teng told CoinDesk.

“Given that DeFi loans are overcollateralized, it makes sense for them to do this, as the value unlocked from paying back their loans (collateral less loans) is greater than the value of the loans themselves (should they opt to not repay).”

Celsius representatives didn't immediately return emails requesting comment on the blockchain data or the transactions.

Celsius paid down $183 million of its debt to Maker since July 1. (DeFi Explorer)
Celsius paid down $183 million of its debt to Maker since July 1. (DeFi Explorer)

The beleaguered crypto lender is scrambling to protect and preserve its assets to avoid insolvency, after a hit to its finances from the implosion of the Terra blockchain and its UST stablecoin in May, and then in June from the failure of the once-top tier crypto hedge fund Three Arrows Capital.

Celsius suspended withdrawals and transactions for its ​​1.7 million users starting on June 12, hired restructuring consultants and reportedly cut 150 jobs. Regulators have opened investigations of the company.

The native token of the Celsius platform, CEL, has tumbled 80% this year.

As of May 2022, the firm had lent out more than $8 billion to clients and had $12 billion in assets under management.

Loans on decentralized finance platforms such as Maker are generally overcollateralized, which means that the borrower pledges more assets in value to the lender than the value of the loan.

Another benefit of the loan paydowns is that it reduces the price point (of wBTC) at which the Celsius collateral would automatically be liquidated by the Maker protocol.

After the payments, the liquidation level of the Celsius wBTC collateral dropped to $2,722, according to the website DeFi Explore. WBTC now trades at $20,200, making the loan 1,101% (about 10 times) overcollateralized.

Celsius still owes $41 million to Maker collateralized by almost 22,000 WBTC ($440 million). (DeFi Explore)
Celsius still owes $41 million to Maker collateralized by almost 22,000 WBTC ($440 million). (DeFi Explore)


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Krisztian  Sandor

Krisztian Sandor is a reporter on the U.S. markets team focusing on stablecoins and institutional investment. He holds BTC and ETH.