Celsius Reclaims $410M of 'stETH' Tokens After Paying Down $81M Debt to Aave

The embattled crypto lender Celsius is inching closer to fully paying off its loans from decentralized finance protocols, reducing its outstanding debt to $59 million.

AccessTimeIconJul 12, 2022 at 3:04 p.m. UTC
Updated May 11, 2023 at 3:57 p.m. UTC

Celsius Network, one of the crypto lenders facing liquidity troubles in the industry's ongoing credit crisis, appears to have yet again used a maneuver on a decentralized finance (DeFi) protocol to free up hundreds of millions of dollars of trapped collateral.

Transactions on the blockchain show that a wallet linked to Celsius transferred $81.6 million in Circle’s USDC stablecoin on Tuesday to the automated decentralized lending protocol Aave. The move reduced Celsius's debt to Aave to $8.5 million.

Crucially, the transfer freed up $410 million in stETH, a type of staked ether token that Celsius had pledged as collateral against the loan on Aave. The stETH tokens are a derivative version of the Ethereum blockchain’s native token ether (ETH); each stETH token represents 1 ETH locked up on Ethereum's upcoming proof-of-stake network.

The stETH token has been at the epicenter of the liquidity crunch in crypto markets after its price deviated from the supposed 1-to-1 peg to ether. At press time, stETH trades at about 3% discount compared with ETH.

Celsius is one of the largest single holders of stETH, with at least $426 million of the tokens, according to blockchain data firm Nansen's portfolio tracker. The stake represents almost a tenth of stETH's total market capitalization, at $4.4 billion.

Celsius liquidity

Celsius, which at one point managed over $20 billion of client deposits, is one of the crypto lenders that suspended withdrawals to prevent a run on its deposits. It also laid off 150 employees and hired restructuring advisors, as CoinDesk reported.

The down payment represents another maneuver by Celsius to reclaim collateral by paying down debt to decentralized finance (DeFi) protocols.

Last week, Celsius paid off its $228 million debt to Maker, another DeFi lending platform, and got back $440 million of collateral in the form of wrapped bitcoin (WBTC), a BTC derivative, blockchain data shows. After that, Celsius started to make good on its loans from Aave and Compound, paying down $95 million of the debt by Monday.

At press time, Celsius still owed $59 million to DeFi protocols, according to data on crypto data tracker Zapper: $8.5 million to Aave and $50 million to Compound, with $28 million and $199 million locked up on the platforms, respectively, as collateral, denominated in various tokens.

Should Celsius pay off the remaining debt, it could theoretically reclaim the combined $227 million of digital assets to boost its liquidity.

CoinDesk - Unknown
The wallet linked to Celsius reduced its debt to DeFi protocols to $59 million from $140 million. (Zapper)


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

CoinDesk - Unknown

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

Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.