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The Defiant

07/12/2022

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Celsius Continues To Rapidly Repay DeFi Loans

Embattled crypto lender Celsius Network is aggressively paying down its DeFi debts as user withdrawals remain suspended.

Celsius Continues To Rapidly Repay DeFi Loans

Embattled crypto lender Celsius Network is aggressively paying down its DeFi debts as user withdrawals remain suspended.

Since July 1, Celsius has repaid Aave 146M USDC and more than 53M DAI, while withdrawing almost 6,000 wrapped Bitcoin (wBTC), nearly 55,000 ETH and millions of dollars worth of other tokens posted as collateral, according to on-chain data. Celsius has also repaid about 120M DAI to Compound and withdrawn 4,400 wBTC it had posted as collateral. 

Last week, Celsius completely settled its debt to MakerDAO, having paid down $190M in DAI since July 2.

The news comes roughly a month after Celsius appeared to be at significant risk of insolvency. 

On June 13, Celsius suddenly suspended customer withdrawals citing extreme market conditions. In a report released last week, Arkham Intelligence released a report detailing Celsius’ on-chain activity alleging Celsius was forced to freeze withdrawals in order to pay down its debts.

$750M Deployed

“At the start of the market downturn, around June 10th, Celsius appears to have had $604 million of collateral against $303 million in debt on AAVE with a health factor of 1.6. On Compound, Celsius appears to have had $421 million of collateral against a $218 million debt,” Arkham wrote. “After the early June crypto market crash put them at risk of liquidation, Celsius appears to have deployed roughly $750 million worth of liquid capital to these positions, potentially playing a key role in forcing them to freeze withdrawals on June 13th.” 

Aave liquidates collateral in any collateralized debt position with a health factor that falls below one.

As of Monday afternoon, Celsius owes Compound another 50 million DAI, according to on-chain data, with a health factor of 2.88. It owes Aave 72 million USDC with a health factor of 5.3

DeFi Transparency

As they had after Celsius paid off its MakerDAO debt, observers took the company’s attempts to pay back Aave and Compound as proof that DeFi was less vulnerable to financial shenanigans than traditional finance. 

“Celsius paying off loans from DeFi protocols first,” tweeted prominent DeFi investor SantiagoRoel. “Smart contracts with programmed risk parameters can’t be fooled like centralized lenders.”

Mario Nawfal, the founder of crypto consulting firm IBC Group, agreed. 

“When Luna blew up, everyone watched it live on-chain and we all knew the numbers,” he tweeted. “When Celsius, Voyager & 3AC blew up, no one knew anything. DeFi works!”

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