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Celsius Repays $120M Maker Debt

Celsius Repays $120M Maker Debt

Celsius Network has paid another $120 million of its Bitcoin loan to Maker DAO through several DAI transactions. 

$120 Million Debt Repaid

Although either party has not confirmed the news, the $120 million payment was made to multi-collateral Dai vault #25977 in a series of three transactions between July 3 and 4, 2022. Even though Celsius has not admitted that it owns the specific vault in question, it is a widely accepted fact in the community. The three transactions in question involved 64 million DAI, 50 million DAI, and 6.2 million DAI. Since DAI is a stablecoin, pegged to the value of the dollar, these transactions can be summed up to a total of roughly $120 million. Maker is the DeFi protocol behind the DAI stablecoin. 

Celsius’s Solvency Problems

Other than these three payments, a previous amount of $22.6 million was also made to the same vault on July 1 and $53.7 million was paid between June 14 and June 16, 2022. 

Other than its Maker debts, Celsius has several other obligations in crypto and DeFi contracts. Since Vault #25977 used Wrapped Bitcoin (wBTC) as collateral, the threat of liquidation always looms over its head, especially when the price of BTC starts dropping. The vault stands to be liquidated if the BTC falls below a certain price benchmark. Because of its debts with several entities, the vault’s liquidation price back on June 13 was around $17k. June was also the month when BTC prices dropped dangerously low, teetering below the $20K mark. Therefore, the liquidation price of the vault swerved pretty close to Bitcoin’s price and was at risk of forcible liquidation. In fact, it even forced the firm to suspend withdrawals for a while, which unfortunately contributed further to the drop in prices of BTC, ETH, and other leading cryptos. 

Focusing On Debt Repayments

However, the debt repayments have improved the firm’s liquidation price, dropping to a much lower value of around $5K, creating more room for BTC prices to fluctuate without the threat of liquidation. In fact, experts believe that large debt repayments could address Celius’s solvency issues. The firm has been exploring several avenues to recover its position, even hiring lawyers, who advised declaring bankruptcy. Luckily, the firm’s leading executives vetoed that idea and instead chose to focus on buying more time to address the liquidity issues. Instead, investors were asked to avoid the bankruptcy option by selecting “HODL mode” on the Celsius app. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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