Bitcoins and U.s Dollar Bills

Celsius Pays Aave $81 Million; Reduces Its Outstanding Debt to Defi Protocols to $59 Million

  • Celsius is moving closer to completing loan repayments to decentralized finance (DeFi) protocols.

Crypto lender, Celsius, has used its maneuver strategy again. The crypto lending struggling with liquidity issues has paid off part of its loans to Aave protocol. Consequently, causing the release of hundreds of millions of dollars in trapped collateral. A blockchain transaction disclosed that a wallet associated with Celsius sent $81.5 million worth of USDC stablecoin to Aave protocol on Tuesday.

The transfer means Celsius’ debt to the automated decentralized lending firm is now $8.5 million. More importantly, the move enabled Celsius to access $410 million worth of stETH. Celsius had pledged these digital tokens as collateral against its loan to Aave.

Each stETH token is a derivative of the Ether (ETH). ETH is the native token of the Ethereum blockchain. One stETH is equivalent to 1 ETH locked in the blockchain’s forthcoming proof-of-stake network. The stETH tokens are one of the causes of the current liquidity crisis in the crypto market.

The ETH derivative lost its 1:1 peg to the ETH and has yet to reclaim the peg. Currently, the stETH tokens are 3 per cent off the ETH. Data from portfolio tracker, Nansen, showed that Celsius holds $426 million worth of stETH tokens. Thus, making it one of the biggest holders of the ETH derivative token. According to Coingecko data, stETH’s current overall evaluation stands at $4.4 billion. Celsius stETH’s holdings mean it owns nearly 10 per cent of the total market cap of the stETH.

Celsius Insolvency Issues

Before its current troubles, there was a time Celsius was managing $20 billion worth of crypto assets for its clients. However, it had to pause withdrawals to prevent a torrent of withdrawals due to fears that it may become insolvent soon. After that, the company sacked 150 staff members and employed the services of experts to restructure the company.

This payment is the latest in a series of debt downpayment by Celsius to recover its collateral from DeFi protocols. On July 7, blockchain data showed that Celsius reclaimed $440 million in wrapped bitcoin (wBTC) collateral from the DeFi lending protocol, MakerDAO. The wBTC is a derivative of the BTC.

The crypto lender settled Maker’s $228 million debt to reclaim this collateral. Celsius has since deployed a similar technique by paying part of its loans to Compound and Aave. The crypto lender paid $95 million of its debt to the two DeFi protocols (Aave and Compound).

Nevertheless, data from crypto tracker, Zapper, shows that Celsius still has $59 million in debt to DeFi protocols. The data further indicates that Celsius’s debt to Aave is $8.5 million and has $28 million worth of collateral locked there. It also shows that Celsius owes Compound $50 million and has locked $199 million worth of collateral.

It is worth noting that the collaterals on both platforms are denominated in several tokens. If Celsius can clear off all its debt, it would reclaim $227 million in collateral, enhancing its liquidity.

Rebecca Davidson Verified

Rebecca is a Senior Staff Writer at BitcoinWisdom, working hard to bring you the latest breaking news in the cryptocurrency market. In the words of Elon Musk “Buy stock in several companies that make products & services that *you* believe in. Only sell if you think their products & services are trending worse. Don’t panic when the market does. This will serve you well in the long-term.”

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