Celsius Pivots To Paying Off Aave And Compound’s Debt: Report

Celsius pivots to paying off Aave and Compound’s Debt in an attempt to reclaim the collateral it posted as guarantees so let’s have a closer look at today’s latest crypto news.

The transaction came a day after Celsius pivots to paying off and it used a debt paydown to reclaim the collateral on Maker but Celsius started making good on the $258 million debt on Aave and Compound. Celsius is the liquidity-strapped crypto lender and this week paid $223 million of loans on the Maker blockchain protocol to free up $450 million in collateral now they can be trying a similar strategy with two bigger Defi platforms Compound and Aave.

The data from Zapper shows that the crypto wallet linked to Celsius by blockchain intelligence company Nansen reduced the outstanding debt to Compound and Aave to $235 million from $258 million. If Celsius pays off the loans, the lender will be able to reclaim $950 million in assets that are pledged against the debt and are locked up as the DEFI protocols. The moves look like a part of the company’s strategy to restructure the debt and reclaim the collateral that is locked up to cover the alleged hole on the company’s balance sheet.

The bigger picture is that the observers with access to blockchain-data explorers are getting the front seat to watch the troubled company as it works to solve the liqudity crunch in the era of decentralized finance with analyst John Freyermuth saying:

“DeFi debt repayment could provide the necessary liquidity to maximize recoverable value in a potential transaction.”

Celsius’ CEO Alex Mashinsky is working with restructuring experts from the company Alvarez and Marshal and also hired banking giant Citigroup for advice on the options the company said that it will explore options to preserve and protect the assets which can involve strategic transactions and restructuring liabilities. Celsius started to reduce the debt to DEFI protocols as the blockchain data shows. The types of automated loans are over collateralized which means that the borrowers are pledging more assets in value than the loan can take out.

In order to prioritize repaying the Defi, loans is a net positive for the company because the company can reclaim the valuable collateral by spending a chunk of the value. Celsius already started paying the debt towards Maker and in less than a week, it paid off $450 million. The company also transferred $500 million in WBTC to FTX.