Crypto lending platform Celsius is making moves to prevent liquidated positions from lowering the CEL price. Accordingly, the DeFi project has added more Bitcoin to MakerDAO, which has the largest liquidity pools.
Celsius works to survive
Celsius recently suspended withdrawals on its platform. Accordingly, the leading DeFi project has been experiencing serious liquidity crunch recently. It also depends on the BTC price for the platform to see more crypto liquidations, according to on-chain data. Accordingly, if the Bitcoin price reaches $16,852, Celsius will see the liquidation of positions worth $520 million. As we have reported as Kriptokoin.com, the Bitcoin price is currently trading at the level of 22 thousand dollars. However, the leading cryptocurrency is struggling with rising selling pressure.
A catastrophe is imminent for Bitcoin
If Bitcoin price drops to $16,852, Celsius will experience a massive liquidation. Accordingly, a total of $520 million worth of BTC will be sold to open positions by Celsius. In such a scenario, the BTC price is likely to experience a massive collapse. This is because the amount of Bitcoin expected to be liquidated is very high. Such a liquidation would be disastrous for the leading cryptocurrency.
However, Celsius is working hard to prevent this scenario from happening. The leading lending platform has added a large amount of Bitcoin to its position in the last 24 hours. So far Celsius has bought 3000 Wrapped Bitcoins, the DeFi equivalent of BTC, to strengthen its position. However, the value of Bitcoin will determine whether the platform maintains its position. Accordingly, a drop below the aforementioned $16,852 would be disastrous for Celsius and BTC. If the level is exceeded, the platform will likely face bankruptcy. In addition, investors will face the painful situation of almost complete loss of their funds.
Bitcoin price is possible to see below 10 thousand dollars
A liquidation in Celsius could potentially take a Bitcoin price below 10 thousand dollars. Celsius is not alone in the crisis. Leveraging its Bitcoin portfolio to buy more tokens, Microstrategy will face a $1 billion liquidation if BTC prices drop further. Popular cryptocurrency analyst TheCryptoLark said:
“The risk of mass liquidation is one of the biggest dangers that could cause a very painful flash crash for crypto right now! It is possible that several billion dollars in Bitcoin and Ethereum could be sold to desperately weak markets unless much more collateral is given!”
stETH triggered the crisis
stETH, the tokenized version of staked Ethereum, recently had a depping. Depping means that stETH loses its fixation to the Ether price. The Celsius platform hosts quite a lot of stETH. Therefore, stETH is the main culprit for the crisis on the Celsius platform. stETH is not directly related to Ethereum. However, both tokens were panic-sold as investors feared further losses.
The sudden price drop caused a huge drop in the value of Celsius’ balance sheet. Thus, the platform was at risk of being liquidated. Celsius later had to suspend withdrawals. However, the platform has come under criticism for risky staking of client funds in potentially volatile tokens such as stETH. Celsius lost more than $500 million in funding in the last Terra crash.
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