Celsius Network selling Altcoins for BTC and ETH. Should you be worried ?

Celsius, the crypto lender which went bankrupt in July 2022 has started the process to convert altcoins to BTC and ETH by sending nearly $60M altcoins to FalconX and OKX on 17th July.


Before you read here is a little bit of background

Celsius, the bankrupt crypto lender was granted permission from Bankruptcy Judge Martin Glenn of the Southern District of New York to initiate the liquidation of its altcoins. Following its collapse in July 2022 and subsequent approval of its sale to crypto consortium Fahrenheit in May, Celsius is now working on a revised bankruptcy plan. The new plan will primarily involve the distribution of cryptocurrencies to creditors limited to BTC or ETH, with only a few exceptions.

Judge Glenn’s ruling states that Celsius is authorized to

“sell or convert any non-BTC and non-ETH cryptocurrency, crypto tokens, or other cryptocurrency assets other than such tokens that are associated with Withhold or Custody accounts… to BTC or ETH commencing on or after July 1, 2023.”

To ensure compliance with applicable federal and state laws and regulations, Celsius has been in continuous dialogue with the SEC and certain state regulatory agencies regarding the proposed cryptocurrency distribution under the Plan. According to Arkham Intelligence data, Celsius holds a substantial altcoin portfolio valued at around $187.04 million, featuring assets like BNB, Celsius, MATIC, FTT, and AVAX.

Their are two main reasons for this conversion –

1. Regulatory Uncertainity Around Altcoins 

In light of recent SEC actions against major crypto exchanges like Coinbase, Binance, and Bittrex, caution around tokens associated with Polygon (MATIC), Near (NEAR), Cardano (ADA), and others has increased. The SEC’s scrutiny led to delays in winding down the bankrupt crypto lender Voyager, as their VGX token faced potential classification as a security, ultimately affecting a proposed asset acquisition by Binance.US. So it was far better to convert the alts to BTC and ETH to help creditors get their assets back and speed up the winding down process.

  2. Preserving Creditors Wealth

Altcoins tend to be more speculative and as seen in past can go to zero in a matter of days. So to reduce the pain of Celsius creditors and preserve their wealth it’s a good move to convert altcoins to blue-chip cryptos like BTC and ETH which have a fairly large market map and are free from regulatory scrutiny.



So on 17th July Celsius transferred $59.4 million worth of various altcoins to exchanges. 

Celcius

According to Arkham Intelligence, a crypto data tracker, a wallet controlled by Celsius sent $19.2 million in LINK, $13.6 million in MATIC, $7.8 million in SNX, $7.3 million in AAVE, $3 million in BNB, and more than $1 million in ZRX, 1INCH and XAUT to the FalconX address. Meanwhile, the lender also moved around $235,000 worth of ShibaSwap’s BONE to the OKX exchange.

This is not the first time that Celsius has moved a significant amount of altcoins this month. On July 5, Celsius transferred about $74 million worth of SNX, UNI, ZRX and other altcoins.

As of now, Celsius still holds a substantial amount of altcoins including CEL token, MATIC, AVAX, stablecoins, and others. Notably, the CEL token dominates their altcoin portfolio, valued at $106.28 million. Despite its financial struggles, Celsius maintains significant BTC and ETH holdings, accounting for over $350 million of its total assets.

Recently, Celsius reached an agreement with the Federal Trade Commission (FTC) for a $4.7 billion fine, while its co-founder, Alex Mashinsky, faces charges from U.S. regulatory agencies, including the Securities and Exchange Commission (SEC). Mashinsky was arrested on July 13 and is currently out on a $40 million bail.

So is an Altcoin dump coming ?

Well not exactly. The large cap alt Celsius holds will not be affected much by this sell-off. Meanwhile Celsius itself is facing challenges in liquidating some altcoins due to liquidity issues, as highlighted by blockchain analytical firm Kaiko on June 10. The lack of liquidity for CEL and other small cap alts may delay the conversion process and can affect the prices of that coin. Nonetheless the move is in the right direction to help creditors curb their losses.

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