Crypto Analysis Case Study Three Arrows Capital: PART II

You can receive payments in CEL, BTH, ETH, USDC, GUSD, TUSD, USDT, and MCDAI. Cryptocurrencies are a global economic reference thanks to the growth of the value of Bitcoin over the last few years. In this process, new virtual currencies began to rise and fall in value, creating a highly competitive market where you can choose from various currencies, invest in them, pay or make transactions.

  • Celsius has reclaimed “$172 million” in crypto collateral from the Aave and Compound DeFi protocols.
  • As per the company, assets kept in the custody accounts do not belong to its bankruptcy estate.
  • The account protections are strong as they require identity verification, two-factor authentication and a QR code authenticator app for registration and profile login.
  • This is a relatively simple process whereby users go to the in-house wallet on the app, select the payment method of choice between credit card or bank wire transfer, the crypto to purchase and the fiat currency used for the transaction.
  • Understand it thoroughly, and avoid making large sums of investments at the onset to ensure the safety of your assets.

This excludes a startling $12.3 billion that the company has attributed to a fall in the market value of its cryptocurrency assets. Users must transfer their assets to the centralized platform and entrust the management and match up of their orders to the platform. This places even more importance to the security of the platform, and whether it will treat its users equally. OKX – OKX is a digital exchange offering trading on hundreds of cryptos across desktop and mobile applications with low fees. This is where Celsius users can temporarily disable all outgoing transactions from the account, essentially “holding on for dear life” as the name suggests. When this is activated, there is a 24-hour withdrawal prohibition before users can revert their account to normal.

This is possible as the broker generates profits through lending activities, rather than charging early termination, loan origination, deposit or withdrawal fees. After choosing the loan type, input the amount in USD that you wish to loan and which cryptocurrency to as collateral, the quantity of which Celsius calculates automatically. The user will then select the interest rate and loan term, where lower interest means more crypto is locked up as collateral.

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They can also be divided into centralized and decentralized platforms. There are no hidden fees that users pay, instead, Celsius makes money by lending coins to hedge funds, exchanges and institutional traders. The maneuver followed a similar treasury-management tactic that Celsius used recently to fully pay off and close its loans from the DeFi lending protocols Aave and Maker. The loans on these protocols are overcollateralized, meaning the borrower has to lock up more digital assets in value than the loan’s value. Celsius Network, the embattled crypto lender that is facing liquidity troubles, fully paid off its remaining debt to the decentralized finance lending protocol Compound, freeing up nearly $200 million of pledged collateral.

After the down payments, Compound released 6,900, then 3,100 wBTC tokens to Celsius that had been locked up on the protocol as collateral. Celsius, a bankrupt crypto lending company, is looking for $70 million from loan reimbursement that will stretch its channel cost over November. Mr Wang alleged that the contracts involved a sale and buyback of 400,000 Tezos and that the Tezos and their traceable proceeds were held on trust for him by Mr Darby.

Celsius Network is a cryptocurrency lending application that works on a blockchain basis. It has been in operation since 2017 and is currently how and where can i buy bitcoin from britain 2020 a market leader. Usha is a diehard crypto enthusiast and has been actively writing on different facets of the blockchain and crypto world.

Crypto Borrowing

As a result, it reclaimed more than a billion dollars worth of its crypto assets, mostly in wBTC and a type of ether derivative token called stETH, which had been stuck on the protocols as collateral. Paying off overcollateralized loans is theoretically a net positive for Celsius’s liquidity because the move unlocks more assets in value than what is needed to pay down the loans. Data on the blockchain transaction tracer Etherscan shows that a wallet linked to Celsius transferred 50 million DAI tokens – MakerDAO’s dollar-pegged stablecoin – to Compound in two instances.

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For example, in theory a 20% weighted average loss in cryptocurrency values inMay 2022, would mean that 3AC’s $3,000 million value decreased to $2,400 million in one month. If this 20% WAL continued in June 2022, it would mean that 3AC’s$2,400 million value decreased to $1,920 million, i.e., a combined 8-week loss of$1,080 million. A 30% WAL would leave $1,470 million and a 40% WAL would leave$1,080 million of assets remaining. This is why concentration risk across a single investment class can become so problematic in times of high market stress. InPart II of this Case Study, we will put together events that may have directly and indirectly contributed to the collapse of the crypto hedge fund.

Celsius Headlines

For high-net-worth and institutional clients, Celsius offers customisable services that can adhere to their needs through support and apps. One of the services that Celsius Pro provides is treasury management with a dedicated accounting team to monitor loans and risks in real-time. This allows customers to earn rewards by lending to Celsius without having to include collateral. In order to use any of the features on the Celsius platform, you must first acquire some crypto. You can either transfer crypto you already own to the coin’s native blockchain or purchase crypto directly.

  • Celsius is regulated and holds licenses with the American FinCEN and SEC, so users can be assured that it is a safe and trustworthy platform.
  • These decisions highlight that the courts will look at whether transactions involving cryptocurrency create a trust in the same way as transactions involving any other type of property, which is important.
  • Celsius’s self-reported assets have more than halved from a peak reached late last year.
  • The decline in their assets under management has been remarkable, falling from $28 billion in November to around $3 billion today.

This is evident as there have been no reports of hacks or security breaches in over three years of conducting business. The loan application process is simple, users must go to the borrow section of the Celsius app, click the ‘apply for loan’ button and then choose between a stablecoin loan or a USD loan. For a stablecoin loan, you have the choice to receive any of the provided stablecoins on Celsius. With this lending service, Celsius also provides a yield calculator for lenders to work out their potential earnings.

Are There Any Gas Fees With Celsius?

The bankruptcy filings also tell the story of Celsius and Tether. Around late May or early June — just before withdrawals were stopped — Tether margin-called Celsius on the 841 million tethers still outstanding on Celsius’ loan from Tether. None of this was hinted at in Tether’s odd blog post last week attempting to get out ahead of this bankruptcy filing. Kraken – Kraken is a top-rated cryptocurrency trading exchange offering the largest tokens and altcoins by market cap. Celsius prides itself on its low-cost services, not charging clients any trading fees.

  • Users must know how to protect and back up their wallet and private key to avoid any kind of losses that may happen due to accidents or security issues.
  • Lending was a great business for free money (or “money”) in the crypto bubble — but when the bubble collapsed, suddenly lending wasn’t such a great business.
  • Celsius, said Bloomberg, citing Celsius’s CEO, had borrowed 1 billion tether tokens and was paying 5-6 percent interest on the loan.
  • Before deciding on these issues, we recommend you talk to a financial advisor or cryptocurrency specialist to determine how to protect your assets.

The trustee will be expected to examine all payments to creditors in the preceding 90 days to see if these should have been administered as part of the bankruptcy. If those payments to creditors should have been part of the bankruptcy, then the trustee can claw them back. If an incorrectly-paid creditor says “ahaha, blockchain” or similar, then that creditor will be on the hook. Other assets include a stated $620 million in crypto-denominated loans to other entities.

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The loans provided to Celsius are unsecured – there is no current legal recourse to recover them, although we anticipate that the legal department at Celsius is going to be very busy this summer. Celsius has been at pains to distance itself from banking regulation to prevent governments expecting it to apply for a banking license and fall under the scope of banking insurance, either in the US or anywhere else. Celsius Network is a UK-based cryptocurrency lending and borrowing platform with an in-built exchange and support for trading almost 40 digital tokens. Celsius has joined the booming DeFi industry with its own decentralised exchange built upon an automated maker model system . A DEX is different from a traditional exchange as, rather than connecting buyers and sellers to complete transactions via an order book, the user trades crypto via smart contracts and ‘liquidity pools’.

These events, like the financial crisis in 2008, will demonstrate who has the solid foundations required to operate responsibly in this market. Cryptocurrency trading platform Celsius has demonstrated clearly that the fears of many institutional investors about the cryptocurrency market’s infrastructure are justified. This was also something the SEC had been focusing on in its deliberations around whether cryptocurrency markets required more regulation. Ultimately much of the existing crypto market ‘nuts and bolts’ has been built by tech specialists rather than financial market professionals.

Climate-aligned investment mounts to $913bn, our latest report uncovers these opportunities. Celsius has reclaimed “$172 million” in crypto collateral from the Aave and Compound DeFi protocols. Celsius’ largest creditor, at $81.1 million owed, is Pharos , whose founder Tara Mac Aulay is an Alameda co-founder and several employees have various ties to Sam Bankman-Fried of Alameda and FTX. The company’s current burn rate is $16 million a month on payroll, mostly for the executives. In the declaration from Alex Mashinsky, Celsius has a $1.2 billion hole in its balance sheet.

Celsius is ~$1.2bn in the red with $5.5bn of liabilities, most of which represent customer holdings according to their bankruptcy filings. For present purposes, the importance of these types of investments best bitcoin exchanges of 2021 lies in their theoretical valuations and lack of liquidity. Crypto lending platforms are a new alternative to banks for borrowing and lending, aimed specifically at cryptocurrency tokens.


The lending, or ‘Earn’ service is where a Celsius user can stake either a stablecoin, gold token or cryptocurrency that Celsius then loans out to either retail or institutional borrowers. After the tokens are loaned out, the lender then earns weekly payments either in-kind or in CEL from the revenue that is generated from the loans. The staking rewards vary from time to time so check the Celsius Network website for the most up-to-date rates. Celsius is a centralised cryptocurrency lending exchange where users can either take out cryptocurrency loans or invest in crypto to earn interest fees and profit from increases in crypto values.