Celsius’ Positions are Now Healthier, Three Arrows Capital Was a 'Victim of Contagion' - Nansen

Source: AdobeStock / Olivier Le Moal

 

Troubled crypto lender Celsius (CEL) has managed to improve the health ratio of its on-chain positions since pausing withdrawals, according to blockchain analytics platform Nansen. Meanwhile, they said, the crypto hedge fund Three Arrows Capital (3AC) was the victim of the contagion.

Celsius paused withdrawals, swaps, and transfers between accounts on June 12 citing "extreme" market conditions. Subsequently, the crypto lender started topping up collateral and repaying loans in order to maintain a healthy loan-to-value (LTV) ratio.

During the period between June 8 to June 17, Celsius was constantly transferring funds between different wallets, as well as depositing large amounts of staked ethereum (stETH) to crypto exchange FTX, presumably signaling an over-the-counter (OTC) deal, data compiled by Nansen shows. 

All of these have enabled the crypto lender to exchange their illiquid stETH for more liquid assets while protecting leveraged assets by paying down debt, thus improving the health ratio of its on-chain positions.

"For now, their health ratio is still decent in the context of things, as long as there isn’t a sudden downward swing of >30% in prices of their collateral," Nansen said in a report shared with Cryptonews.com.

More specifically, Celsius’ LTV ratio stands at 1.56 on Aave (AAVE), meaning that prices need to drop more than 36% for the crypto lender to be in trouble. Likewise, on Compound (COMP), the ratio is at 1.39, which suggests prices need to drop more than 28% for Celsius to get liquidated.

"Pausing withdrawals probably helped to prevent a bank run while providing Celsius time to recalibrate and manage the risks in their investments," the report said.

The report also revealed that 3AC was likely a "victim" of the contagion. Here contagion refers to the spread of crises from one protocol (Terra) to others (like 3AC).

The crypto fund had to dump its pile of stETH at steep discounts in order to shore up finances to top up collateral as prices plunged.

On-chain data shows that 3AC started unwinding its stETH positions for ethereum (ETH) and stablecoins between June 13 and 14, when stETH plunged to as low as ETH 0.933, which represents a discount of 6.7%.

stETH is a tokenized form of staked ether locked inside staking protocol Lido that can be redeemed for ETH once The Merge is completed.

Historically, stETH has been traded roughly at par with ETH. However, the recent market crash, which forced some of the biggest holders of the token to exchange their stETH for more liquid assets, adversely affected its price.

AT 9:07 UTC, stETH is trading for USD 1,081, down 8.6% in a day and up 1.6% in a week. At the same time, ETH is trading at USD 1,126, down 8.2% in a day and remaining unchanged in a week. 

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Learn more: 
- Celsius 'In Dialogue' With 'Regulators & Officials', Gets Quieter About Its Operations
- CEL Token Soars as Celsius Shareholder Proposes Recovery Plan, Celsius Pays Compound

- Three Arrows Default Notice
- BlockFi, Crypto.com, and Others Come Forward as Three Arrows Hires Advisers, Babel Finance Pauses Withdrawals

- Smaller Exchanges Could Fall Due to Confusing ‘Web of Relationships’, Report Warns
- These Are the Types Crypto Projects that Could be Bailed Out According to Binance CEO