Although most crypto investors have good reason to be optimistic this week, Celsius creditors may be in for a bad deal if digital asset prices continue to rise.
The bankrupt crypto lending firm may soon be able to pay off currency-based debts simply by liquidating newly-earned Bitcoin (BTC) and Ethereum (ETH) assets alone. That means the bankruptcy will lose a lot of assets, while its counterparts are compensated with a more difficult time entering the crypto market.
The Celsius Dilemma
According to @CelsiusNewCo in X – an account managed by several creditors of Celsius – the company can “pull all creditors” if BTC reaches $54,879 per coin, and if ETH reaches $3,750.
The account cited a thread from Simon Dixon – CEO of BankToTheFuture, a major investor in Celsius – posted in July, using figures calculated by his company. Estimates are based on a 50/50 liquidation basis for each coin.
“It is very important that we get out of Chapter 11 before Bitcoin & ETH approach these numbers to avoid another rug pulling that we will have to fight when it comes,” he said at the time.
Celsius filed for bankruptcy in June last year after the collapse of crypto market prices forced the company to freeze user withdrawals. A later look at the company’s balance sheet revealed that it was $1.2 billion in debt.
Last month, the company got court approval for the bankruptcy restructuring plan, which included the transfer to a Bitcoin mining/staking entity owned by NewCo creditors. It also involves distributing $2 billion worth of BTC and ETH to its customers – the two coins Celsius began consolidating its digital assets with in June.
What is the Best Result?
If BTC and ETH continue to rise, bankruptcy will pay off all USD claims while keeping all other assets, per Dixon’s July thread.
Customers had mixed feelings about such an outcome when discussing the matter on Tuesday. While some are not satisfied with not receiving their debt crypto payouts, others are willing to settle for any immediate solution after 18 months of waiting.
“I wish they would do this just so I can get on with my fucking life,” SAYS @jboinvest in X.
Bitcoin touched a new annual high of $44,000 on Tuesday. That’s up 16% in the past 7 days and 117% since Celsius filed for bankruptcy on July 12, 2022.
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