Failing cryptocurrency lending company Celsius Network is preparing to withdraw approximately $465 million worth of ethereum (eth) as part of its efforts to compensate creditors. This development follows the company's bankruptcy filing in July 2022, leaving creditors in a lengthy 18-month wait for financial compensation.
Celsius's decision to withdraw a substantial amount of eth is seen as a necessary step to ensure liquidity for creditor compensation. The company's official announcement, made through X (formerly Twitter), highlights the strategic nature of this move:
“In preparation for any asset distribution, Celsius has initiated the process of asset withdrawal and rebalancing to ensure ample liquidity. Celsius will unstake existing eth holdings, which have provided valuable staking reward income to the estate, to offset certain costs incurred during the restructuring process. “Significant staking activity in the coming days will unlock eth to ensure timely distributions to creditors,” said the advertisement read.
Is Celsius responsible for over 86% of eth in the output queue?
Blockchain analytics firm Nansen claims that Celsius holds about a third of the total Ether in the unstaked output queue, totaling around 206,300 eth. This figure translates into a market value of around $465 million. To date, Celsius has already withdrawn over 40,249 eth.
Tom Wan, on-chain data analyst at 21.co (parent company of 21Shares), Elaborated Regarding the situation, “Over 540,000 staked eth (16,670 validators) are currently being withdrawn from the ethereum Beacon chain. To come out and completely withdraw now, it will take 14.5 days.” The researcher added that 352,000 eth (54.7%) waiting to be withdrawn belong to Figment and 206,000 eth (32%) belong to Celsius.
“The Figment recall is also likely to belong to Celsius. In early June, when Celsius redeemed 428,000 stETH from Lido, they staked 197,000 eth again via Figment,” he added. Therefore, Celsius could be responsible for removing 86.7% of all eth in the queue.
Is an ethereum price drop coming?
While some investors express concern that the release of such a large volume of staking tokens could negatively impact the price of ethereum, others maintain a more calm outlook, believing that the market is strong enough to absorb this additional volume.
Even in the unlikely event that all the eth in the queue is sold, liquidity appears to be strong enough to absorb such a process, which would be gradual rather than sudden. According to Coinmarketcap, current eth trading volume is around $11.35 billion, suggesting that the market could support the potential sale of all of Celsius's eth holdings without a major eth price drop. Therefore, instilling fear is superfluous.
After receiving approval for its liquidation plan, Celsius has allowed eligible users to withdraw 72.5% of their cryptocurrency holdings, with this option available until February 28. A court document filed last September revealed that approximately 58,300 users own a total of $210 million in assets, which the court has classified as “escrow assets.”
At the time of this publication, eth was trading at $2,250. The 1-week chart for eth/USD indicates that, over the past five weeks, ethereum price has formed a consolidation range. The chart defines this zone with a lower limit at $2,125, indicated by the red area, and an upper limit at the 0.382 Fibonacci retracement level, located at $2,441.
Featured image from Shutterstock, chart from TradingView.com
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