The cryptocurrency lending platform Celsius has paid off the decentralized lending protocol Maker’s loan and recovered 21,962 WBTC of collateral almost a month after user withdrawals and transfers were restricted. As a result, Celsius, which is currently experiencing liquidity issues, is anticipated to receive improved liquidity.
Due to “extreme market conditions,” Celsius abruptly announced the suspension of user withdrawal, currency exchange, and transfer functions on June 12 of this year. Soon after, the company started spreading rumors that it was insolvent, suffering from a severe liquidity crisis, and even on the verge of bankruptcy.
In a blog post published last week, Celsius stated that the company would work to stabilize its operations and liquidity as soon as possible. It also stated that it would continue to take precautions to protect its assets while looking into options like reorganizing liabilities and pursuing strategic alliances.
On July 7, according to on-chain data, Celsius repaid the Maker Protocol for the $41.2 million loan that was still outstanding, causing the Maker Protocol to release the loan’s $448 million collateral, 21,962 WBTC.
A few hours later, Celsius added another $500 million in WBTC to the cryptocurrency exchange FTX. According to blockchain data provider Nansen, 24,463 WBTC were transferred from wallets associated with Celsius to FTX.
The action raises the possibility that Celsius is looking to exchange the WBTC for a more liquid asset.
The collateral released by Celsius “can be sold on centralized exchanges or through OTC transactions to meet the needs of creditors and withdrawals by customers,” according to Fundstrat analyst Walter Teng.
Repaying the loan might appear to be good news for Celsius, but if the company sold off such a large amount at once, it might increase market volatility.
