Celsius, a centralised lending firm currently experiencing a major liquidity crisis, had previously borrowed hundreds of millions of dollars on Maker with wrapped bitcoin (WBTC) as collateral.
By paying down its Maker debt, Celsius has reduced the risk of its loan position being liquidated. In decentralised finance, liquidations occur when traders fail to repay their loans on time, and the protocols automatically sell their collateralised assets.
Source: DeFiExplore
As the price of bitcoin fell recently, Celsius faced a greater risk of liquidation. According to DeFiExplore data, the repayment has helped reduce the liquidation price on its WBTC collateral to less than $5,000.
On-chain data indicates that Celsius’ obligations are complex and it has collateralised loans on multiple lending protocols. The company still owes Maker $82 million, Compound $100 million, and Aave $175 million.
Celsius’ recent developments are notable given questions about the platform’s solvency and broader concerns about solvency in the crypto industry — particularly among centralised lenders — as major digital asset prices fall. Concerns were heightened when Celsius announced that it would suspend withdrawals from its platform.