$18,300: Bitcoin Targets the Celsius Network for Liquidation

Bitcoin fell below $23,000 on Monday as it appeared to target the $18,300 range necessary to liquidate a Celsius Network loan on the Maker Protocol worth $278 million.

Analysts noted that as of early Monday, the exchange held 17,919 wrapped bitcoin (WBTC) leveraged in the Maker Protocol, a DeFi lending platform. The collateral, worth around $420 million, would have been liquidated if bitcoin hit a price of $22,584. But just hours before the market’s leading token cratered to $22,600, Celsius doubled down on the position to lower its approximate liquidation price to $18,300.

It was unclear how Celsius acquired the cash to increase its collateral, which allowed it to keep a loan open for 278 million DAI, a stablecoin pegged to the U.S. dollar. But the exchange announced on Sunday that it was prohibiting users from withdrawing their funds from the platform until further notice “due to extreme market condition,” stoking suspicions that the exchange had become insolvent and was utilizing customer funds to retain its credit lines.

Celsius stands to lose its $278 million loan from Maker in the event of liquidation, as well as a significant portion of its $420 million in collateral. Token prices have historically tended to target large positions for liquidation — especially when they are public. That fact had market watchers widely expecting bitcoin to continue falling until it successfully eliminated Celsius’ position, though they acknowledged that it could take several weeks.

On-chain data revealed Celsius moving 9,500 WBTC worth around $240 million to crypto exchange FTX on Sunday prior to its shutdown, along with more than 104,000 Ethereum over the preceding three days, valued at more than $150 million. That means the exchange may have room to push its liquidation point down a little further — if it utilizes the likely remnants of its users’ funds.

Anyone worried that their is a bounty on Celcius, and their level being lower just means price gets pushed lower?

I mean, if you are running from a bear with them, you hope they trip earlier than you. https://t.co/ylpUu1mlIk

— Cantering Clark (@CanteringClark) June 13, 2022

Celsius has been silent on its problems outside of Sunday’s announcement that it was seizing user funds, fueling widespread customer fear that their funds were being being used as part of a last-ditch effort by Celsius to prevent liquidation. “Celsius made some big time gambles with user funds and now those gambles are not turning out,” one user wrote on Twitter on Monday. “Celsius is likely using customer funds to cover the margin call on company loans.”

“Looks like a game of brinkmanship whereby Celsius will keep using frozen customer deposits to lower the liquidation threshold,” wrote Mike Alfred, the founding CEO of BrightScope and Digital Assets Data. “And the market will keep chasing that number lower. Nasty game that ends with Celsius bankruptcy. Customers will get cents on the dollar back.”

The company did not respond to multiple requests for comment on from GoblinCrypto.

The organization has been under apparently increasing strain in this year’s bear market. The company turned to Terraform’s Anchor Protocol in December — which offered interest rates of up to 20 percent — with a deposit of $535 million, potentially because Celsius was desperate to pay its own customers at advertised interest rates of up to 17 percent. When Terraform ecosystem’s collapsed in May, according to a report by research firm Nansen, Celsius’ frantic withdrawals made it one of the seven biggest contributors to its fall.

In since-deleted messages on Twitter, CEO Alex Mashinsky remained combative with a growing number of skeptics leading up to Sunday’s announcement. “Do you know even one person who has a problem withdrawing from Celsius?” he asked in a missive directed at one critic mere hours before the platform shut down. “Why spread [fear, uncertainty and doubt] and misinformation? If you are paid for this then let everyone know you are picking sides, otherwise our job is to fight [traditional finance] together.”

As of Monday, the price of the company’s token, Celsius (CEL), stood at 28.9 cents, a decline of more than 96 percent from an all-time high of $8.05 set last year.

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