Celsius withdrawing nearly $800 million of Ether from Lido

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key takeaways

  • Bankrupt lender trying to get back $779 million worth of ETH from Celsius lido
  • ETH represents 7% of the total amount staked with Lido
  • Celsius has $4.7 billion in debt with creditors, and sent the market into a tailspin last year after Terra got caught in the transition.
  • Celsius staked $75 million in ETH last week with staking provider Figment

Celsius is the temperature unit of choice for all three countries: Liberia, Burma, and the United States. Celsius is also the name of a popular energy drink that is going viral on social media. But utter the word “Celsius” around a cryptocurrency investor, and they won’t think of any of these things. Instead, they’ll probably shudder and look at nothing but losing cash.

Celsius is, of course, the crypto lender that suspended withdrawals on June 12, 2022. Due to being caught in the contagion following Terra Ecosystem’s spectacular death spiral a few weeks back, the honoree didn’t have the necessary money on deck. Flood of withdrawal requests.

It was forced to declare bankruptcy, owing a terrifying $4.7 billion to creditors.

Now, it is seeking to withdraw 428,000 ETH from Lido, which is equivalent to $779 million at current market prices. Transaction data is traceable on the blockchain Here (withdrawn in increments of 1,000).

Lido is a liquid staking platform where ETH stakers are able to lock up their ETH in exchange for ETH tokens, receiving a yield in the process. Until the Shanghai upgrade (also known as Shepela) went live in April, any ETH held regardless of platform was locked up and could not be withdrawn. That changed as soon as the upgrade went live, and last week Lido started withdrawing.

Looking at the total amount of ETH on the network, it sits at 21.8 million, which is equivalent to 18.15 of the total circulating supply.

Celsius’ requested a withdrawal of 428,000 ETH, which is 0.36% of the entire ETH supply (it also represents 2% of the total staked ETH).

Specifically looking at the amount of ETH staked with Lido, Celsius’ return of 428,000 ETH represents roughly 7% of all ETH staked with Lido. Lido has 28% market share regarding Ethereum staking.

ETH withdrawals will all be processed, but the size of the outflow is such that it may take time, especially if others move to withdraw from the lido. In this event, validators may exit which will slow down the process.

What is more interesting is the reason behind this Celsius withdrawal. Locked ETH was cited as one of the reasons Celsius was unable to honor withdrawal requests last summer, though with $4.7 billion in debt, it is hardly the only one. And to be clear, this was an insolvency crisis rather than a liquidity crisis.

Funds can be transferred in preparation for (partial) repayment of creditors in the future. The bankruptcy process has been extremely slow, however, and MT Gox users are still waiting for compensation, despite the exchange sinking in 2014.

The intriguing aspect of this is the inherent volatility of the underlying assets. ETH sat around $1,800 when Celsius suspended withdrawals, but the middle road hasn’t been smooth. It almost halved in the ten-day period following the news last June, falling to $990. It came close to breaching $5,000 during the pandemic bull run.

This means that creditors awaiting payment are subject to wild volatility – against their will. This could also be a reason why Celsius is pulling back on the underlying ETH.

On the flipside, Celsius staked $75 million worth of ETH with staking provider Figment last week, according to data released by blockchain analytics firm Arkham Intelligence. This is surprising for several reasons. Most notably, Celsius operates its own staking pool with around $300 million in assets under management, so it is curious why it decided not to funnel ETH into its own pool.

Perhaps this suggests that ETH mined from the Lido will be sent there, but this is pure speculation. Either way, the whole process is confusing, although this has been the case with many of Celsius’ actions in the past.

One thing crypto investors may fear is ETH being quickly monetized. If the market is flooded with the $779 million of ETH being pulled out of Lido, this will have a tangible effect on prices, especially as liquidity increases. continues to thin in crypto markets.

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