Celsius Network, one of the crypto lenders facing liquidity troubles in the industry’s ongoing credit crisis, appears to have yet again used a maneuver on a decentralized finance (DeFi) protocol to free up hundreds of millions of dollars of trapped collateral.
Transactions on the blockchain show that a wallet linked to Celsius transferred $81.6 million in Circle’s USDC stablecoin on Tuesday to the automated decentralized lending protocol Aave. The move reduced Celsius’s debt to Aave to $8.5 million from $90 million.
Crucially, the transfer freed up $410 million in stETH, a type of digital token that Celsius had pledged as collateral against the loan on Aave. The stETH tokens are a derivative version of the Ethereum blockchain’s native token ether (ETH); each stETH token represents 1 ETH locked up on Ethereum’s upcoming proof-of-stake network.
Last week, Celsius paid off its $228 million debt to Maker, another DeFi lending platform, and got back $440 million of collateral in the form of wrapped bitcoin (WBTC), a BTC derivative, blockchain data shows. After that, Celsius started to make good of its loans from Aave and Compound, paying down $95 million of the debt by Monday.
At press time, Celsius still owed $59 million to DeFi protocols, according to data on crypto data tracker Zapper: $8.5 million to Aave and $50 million to Compound, with $28 million and $199 million locked up on the platforms, respectively, as collateral, denominated in various tokens.
Should Celsius pay off the remaining debt, it could theoretically reclaim the combined $227 million of digital assets to boost its liquidity.