29 February, 2024

Celsius Liquidations May Stress Crypto Market, Warns Kaiko

8 months ago

08 Dec, 2023

Cryptocurrency lending platform Celsius’s recent approval to begin selling or converting part of its crypto holdings, effective July 1, has led to concerns of a possible market sell-off, according to the research firm Kaiko on Monday. The firm warned that Celsius’s liquidation could place “significant” pressure on the crypto market, particularly if the bankrupt lender decides to sell or convert its reserved assets into Bitcoin (BTC) and Ether (ETH). 

As of June 30, Celsius held over $600 million in crypto assets, with its largest positions being roughly $300 million in BTC and $117 million in ETH. The impact could be significant despite these numbers representing only a fraction of the daily trading volume for the top pair of crypto assets. 

Kaiko forecasted the remaining assets, amounting to approximately $180 million, are spread across smaller capitalization coins, including $100 million in its native token, CEL. This situation poses a problem, as realizing such a value is nearly impossible due to the lack of market liquidity for the token, which has already seen an 83% decrease since the company’s bankruptcy, 

Kaiko added,

With no information about purchase and sell rates or execution locations, the impact on the market could be considerable, particularly as liquidity for these tokens has decreased over the past year,

According to Kaiko, market depth for CEL tokens, primarily held on cryptocurrency exchanges OKX and ByBit, currently stands at a mere $30,000. The report also highlighted that the aggregated market depth for the rest of Celsius’s altcoin holdings has dropped by 40% since last year, amounting to around $90 million in July. Most of the company’s other holdings have also significantly depreciated since filing for bankruptcy last July.

On July 19, Fahrenheit Holdings, a group of leaders in Web3, would be taking control of the assets as part of the court-approved bankruptcy plan. They are expected to host a public Twitter space to discuss their implementation strategy.



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