Celsius Fully Repays MakerDAO Debt

Celsius has fully paid off its debt to MakerDAO, unlocking about $456 million worth of wrapped Bitcoin. It is suffering from a potential $1 billion loss on its MakerDAO lending strategy.

$41 million to Free Up $456 million

It looks like Celsius has finally paid off its debt to MakerDAO.

Etherscan data shows that a wallet identified as belonging to the struggling crypto lending company fully repaid a $41 million debt in DAI today to free its collateral of 21,962 wBTC (worth around $456 million at press time). The wallet closed the MakerDAO vault shortly after paying off the debt.

MakerDAO is a DeFi protocol that lets users mint the DAI stablecoin when they deposit collateral. Celsius is a so-called “CeDeFi” platform that acts as an intermediary for customers, leveraging opportunities found on DeFi protocols like MakerDAO. Celsius and several other major crypto lenders have suffered from major liquidity issues in recent weeks following Terra’s collapse, a downturn in the market, and the crypto hedge fund Three Arrows Capital’s wipeout. 

While the Celsius wallet was no longer at severe risk of liquidation by the time full repayment was made (Bitcoin would have had to hit around $2,722 to trigger a liquidation), data from DeFi Explore shows that on May 12 a $700 Bitcoin move could have liquidated the vault. Celsius added wBTC and DAI on multiple occasions following May 12 in order to increase the collateralization ratio and prevent a liquidation. 

The total value added to the vault over time was $1.8 billion, while the total value retrieved was about $757 million. This is because Celsius was forced to keep repaying DAI to avoid a liquidation, and Bitcoin has also dropped in price since it opened the vault. If Celsius sold its wBTC today, it would book an almost $1 billion loss on its MakerDAO lending strategy. Interestingly, Celsius transferred 24,462.6 wBTC to crypto exchange FTX shortly after it was unlocked.

Celsius controversially paused customer withdrawals last month in order to put itself “in a better position to honor, over time, its withdrawal obligations.” It has since hired advisors to help it deal with potential bankruptcy. It’s now under investigation by the Securities and Exchange Commission as well as regulators from four different U.S. states.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.