The Decision to Sell Ethereum in Staking to Cover Costs
Celsius, a company specializing in cryptocurrency lending, has announced that it will sell some of its Ethereum in staking to finance the costs incurred during the restructuring process. The company went bankrupt last year but still had some ETH in staking that were generating profit. However, it did not have enough funds to cover all expenses, so it decided to remove them from staking and sell a portion. The goal is to eventually return part of the funds to the creditors, with refunds distributed in BTC and ETH.
The Failure of Celsius
Celsius was a centralized platform that allowed cryptocurrency holders to deposit their funds for interest payments. However, poor fund management led to accumulated debts and losses, causing the company to be unable to satisfy all withdrawal requests. While it still had cryptocurrencies in its treasury, users lost control over their funds, which are now managed by bankrupt trustees.
Ethereum Staking Sold by Celsius
Some of the customer funds left in Celsius’ cash register were Ethereum (ETH) that were put into staking for profit generation. However, these liquid funds proved insufficient for covering the expenses of the restructuring process. As a result, Celsius had to remove Ethereum from staking and plans to sell part of it to pay for some expenses and return another part to creditors.
Returns to Creditors
Celsius currently lacks sufficient funds to fully return users’ deposited funds. However, since June 2022, the market value of those funds has increased. While they may not receive the full amount in crypto, they could potentially receive an equal or higher amount in fiat currency. The refunds will be made in ETH and BTC, requiring creditors to sell if they want to monetize their gains from the received crypto funds. The final return of funds is expected to take place in January 2024.
Ethereum Staking: Celsius Takes Advantage
With Ethereum’s transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS), it no longer has mining but instead offers staking opportunities. Staking involves immobilizing ETH on a validator node to participate in transaction validation for a portion of the fees. As fees are relatively high, staking earnings are significant. Additionally, staked ETH is locked up and unusable except for staking purposes. Currently, almost 29 million ETH is staked on Ethereum validator nodes, representing 24% of the existing ETH.
Hot Take: Celsius Sells Ethereum in Staking to Cover Costs and Repay Creditors
Celsius has made the decision to sell some of its Ethereum in staking to finance the costs incurred during its restructuring process. This move comes after the company’s bankruptcy last year and its inability to cover all expenses with existing funds. The goal is to eventually return part of the funds to creditors, with refunds distributed in BTC and ETH. While Celsius may not have enough funds to fully repay users’ deposited funds, the increased market value of cryptocurrencies since June 2022 may allow for lower amounts in crypto or potentially higher amounts in fiat currency. The final return is expected to take place in January 2024.
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