Did Celsius Borrow $1B from Tether Using Bitcoin as Collateral? Unpacking the Loan and Liquidation
The question of whether Celsius borrowed a significant sum from Tether using Bitcoin as collateral has been a subject of intense scrutiny and debate within the cryptocurrency community. Reports have surfaced detailing a substantial loan agreement between the now-bankrupt Celsius Network and Tether, the issuer of the USDT stablecoin. Let's delve into the details surrounding this controversial transaction.
The Reported Celsius-Tether Loan Agreement
Previously, it was reported that Celsius borrowed $1 billion from Tether using Bitcoin as collateral, with an interest rate between 5% and 6%. Reportedly Celsius took a loan from Tether With Bitcoin as Collateral. In return Celsius will pay 5-6% interest. This arrangement immediately raised questions over the operations of Tether, specifically regarding its lending practices and the collateralization of its stablecoin.
Bitcoin as Collateral: The Details
Tether, a stablecoin designed to always be worth $1, has lent billions of dollars to crypto companies with bitcoin as collateral, Bloomberg reported on Thursday. In return for this loan, Celsius sent Tether 39,542.42 BTC in collateral. This move signified a significant reliance on Bitcoin's value stability, although the inherent volatility of Bitcoin inevitably introduced risk.
Liquidation Concerns and Lawsuits
As the price of Bitcoin dropped, and per the two parties’ agreement, Celsius was required to provide additional collateral to maintain the loan's terms. The lawsuit seeks to reclaim BTC tokens that Celsius sent to Tether as collateral for loans of the USDT, which Tether liquidated after the Mashinsky-founded platform faced financial difficulties. Tether liquidated the collateral when Celsius failed to meet its obligations, leading to further financial strain on the platform.
The Impact and Aftermath
The Celsius-Tether loan highlights the complexities and potential risks associated with collateralized lending in the cryptocurrency market. The liquidation of Bitcoin collateral added to Celsius's financial woes and ultimately contributed to its bankruptcy. This situation continues to be a focal point in ongoing legal proceedings and regulatory investigations, prompting a closer examination of stablecoin lending practices and the stability of the broader crypto ecosystem.