If digital asset prices continue to climb, Celsius creditors may face a bad deal as the bankrupt crypto lending firm could pay its cash-based debts by liquidating its profitable Bitcoin (BTC) and Ethereum (ETH) holdings alone. This means that the bankruptcy would keep more assets while its counterparties struggle to enter the crypto market.
The Celsius Dilemma
According to a tweet by @CelsiusNewCo, if BTC reaches $54,879 per coin and ETH reaches $3,750, the firm will be able to “rug pull all creditors.” These estimates were 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 pull that we will need to fight hard against if it comes up,” said Simon Dixon, CEO of BankToTheFuture and a major Celsius investor.
Celsius filed for bankruptcy in June of last year due to collapsing crypto market prices. The company’s balance sheet revealed $1.2 billion in debt. Last month, the bankruptcy restructuring plan was approved, which involved transitioning into a Bitcoin mining/staking entity owned by NewCo creditors and distributing $2 billion worth of BTC and ETH to customers.
What’s the Best Outcome?
If BTC and ETH continue to rise, the bankruptcy can repay all USD claims while retaining other assets. Some customers are dissatisfied about not receiving their owed crypto payouts, while others are willing to settle for any immediate solution after 18 months of waiting.
Bitcoin reached a new yearly high at $44,000 on Tuesday, up 16% in the last 7 days and 117% since Celsius filed for bankruptcy.
Hot Take: What’s Next for Celsius?
If BTC and ETH prices keep climbing, Celsius may be able to pay off its cash-based debts by liquidating its profitable holdings. While this may benefit the bankruptcy, it could leave creditors in a tough position if they want to enter the crypto market. The firm’s restructuring plan includes distributing $2 billion worth of BTC and ETH to customers, but there are mixed feelings among customers about this outcome. Some are frustrated with the delay in receiving their owed crypto payouts, while others are willing to accept any immediate solution. As BTC reaches new yearly highs, it remains to be seen what lies ahead for Celsius and its creditors.
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