Why is half a billion in Bitcoin flooding market as Celsius faces fraud allegations?

Embattled crypto lender Celsius, who are staring insolvency in the face due to knock-on effects of the crypto contagion, about which I wrote a deep dive here last month, may be landing a further body blow to the crypto markets.

24,000 wrapped bitcoins, worth half a billion dollars, have been transferred from their account to cryptocurrency exchange FTX, per blockchain data revealed by Nansen below.


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Wrapped bitcoin (WBTC) is a tokenised version of Bitcoin, which is compatible on the Ethereum and therefore can be used in a wide array of decentralised finance protocols. This half a billion of wrapped bitcoin indeed comes from of these decentralised platforms – Maker.

Celsius’ Maker Loan

Celsius had pledged the WBTC as collateral against loans. As Bitcoin tanked during the crisis last month, Celsius repeatedly topped up the position in order to avoid being liquidated. Indeed, this is partially what drove fear and panic selling, the thought that Celsius’ loan could have been liquidated and all the supply flooding the market.

That Maker loan is now paid down – wallet address can be found here if you want to take a dive through their history, but the below screenshot shows the collateral in WBTC repeatedly being added on June 11th and 13th (timestamps on the right) as Celsius struggled against the wave of selling.

In all likelihood, this will be sold for more liquid assets, as Celsius continues to flounder in order to survive. Half a billion is a heavy chunk of change, but a potential flooding of supply won’t spook the markets as much as it would have if it was dumped during the crash last month. Fear breeds panic and panic breeds fear, so another bit of gasoline doused on the raging fire last month would have been a lot more impactful than currently, where Bitcoin has stabilised at least for the short-term.

Interestingly, the price of WBTC has not moved off BTC, trading at $21,800 compared to Bitcoin’s $21,800 at time of writing, and hence retaining its “peg” (getting nasty throwbacks to Terra in writing that sentence).

Blockchain

One thing is clear: crisis talks are ongoing at Celsius as management fight tooth and nail to save the company. I outlined in my deep dive last month how sceptical I was that this was possible, but I guess we will see. Yesterday brought the further hammer blow that the company was facing a lawsuit for operating as a Ponzi scheme. And it was filed by staking software and investment firm KeyFi, with allegations dating as far back as March 2021.

It does go to show just how fascinating the blockchain can be, however. Tracking half a billion in funds moving around as a firm flails around for liquidity to save itself, and seeing all this live on a public Internet page, is really cool.

What’s not cool, on the other hand, is Celsius’ finances.

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Source: https://invezz.com/news/2022/07/08/why-is-half-a-billion-in-bitcoin-flooding-market-as-celsius-faces-fraud-allegations/