The Much-battered Bitcoin Bounces as Crypto Whales Fail To Trigger a Margin Call For Celsius-held wBTC


Bitcoin appeared to be on the verge of a Lehman moment on Saturday when the world’s largest cryptocurrency fell below its previous peak of the $ 19,511 bull cycle, something that had never happened before. Add to that the cascading settlements that emanate from various corners of the cryptographic sphere, and the sentiment around Bitcoin couldn’t be more bleak. However, at the time of writing, Bitcoin seems to have recovered gently, recording gains of almost 10 percent compared to the $ 17,663.8 minimum recorded by BTC a few hours ago.

Some analysts have continued to speculate that the latest fall in Bitcoin has been fueled by the desire of a few whale-sized investors to launch another high-profile margin call, this time aimed at the wBTC held by Celsius in a vault. Before we discuss this aspect, let’s elaborate on the threat of cascading margin calls and settlements that are still very much alive in the cryptographic sphere.

Bitcoin is at a critical level of support, but expects much more pain as sophisticated traders are now betting on the collapse of Celsius (CEL) [Updated]

Bitcoin Lehman Moment: Cascading Settlements Across the Cryptographic Sphere

Readers would remember that the current fall of Bitcoin and the rest of the cryptocurrency has accelerated after the dramatic fall of the stable UST currency of Earth and its counterpart LUNA. That fall exposed not only the bottom of the cryptocurrency industry and the associated vulnerabilities of algorithmically stable currencies, but also laid the groundwork for the current upheaval.

The cryptocurrency lending company Celsius is believed to have been very successful when the UST and LUNA Earth coins collapsed. With its liquidity already in a precarious position, Celsius was forced to stop all withdrawals from its platform a few days ago when Ethereum bet on Lido (stETH), a variant of decentralized finance (DeFi) of Ethereum that is issued against bets of Ethereum bets, and that it can be exchanged for Ethereum on a 1: 1 basis but only after the Ethereum 2 transition takes place after the merger event in late 2022 or early 2023, detached from its theoretical parity with Ethereum. Since stETH is widely used as collateral in the DeFi space for underwriting loans, Celsius has faced a liquidity crisis as investors began to bail out large amounts of stETH by Ethereum when the 1: 1 theoretical fix broke. to buy Ethereum using stETH is not so great. Consequently, Celsius was forced to stop all withdrawals as it could not meet Ethereum’s demand.

Similarly, Hong Kong-based cryptocurrency lending firm Babel Finance has now also frozen withdrawals amid worsening liquidity across the DeFi space.

Of course, high-profile hedge funds have also been affected by this continuing cascading failure. To find out, Three Arrows Capital (3AC), a hedge fund that has been especially active in the cryptographic sphere lately, will invest about $ 200 million in Earth earlier this year. However, with the fall of the UST and LUNA Earth coins, the hedge fund lost almost all of its investment, causing a liquidity crisis in the company, which has since worsened in light of the wide wave of liquidation that is cross the market. the entire cryptographic sector. According to the Wall Street Journal report, 3AC is considering a fire sale of its assets, as well as a bailout by another as-yet-unnamed financial player. If there is a fire sale, it is likely to further alleviate the sentiment surrounding Bitcoin and other cryptographic assets.

In addition, MakerDAO, the decentralized entity behind the stablecoin DAI, has now stopped the process of minting and depositing the stablecoin on Aave’s cryptocurrency loan platform.

Michael Saylor of MicroStrategy wanted people to mortgage their homes and “buy Bitcoin,” but the company itself is now on the verge of a margin call.

According to a Dune Analytics tab, over the past 7 days there have been more than $ 250 million in settlements in Aave, Compound and MakerDAO.

As if things weren’t nervous enough, Tether also confirmed a DDoS attack against tether.io, the entity’s native website that is behind the largest stablecoin on the market today.

Are Cryptographic Whales Trying to Craft the Fall of Celsius?

This brings us to the crux of the matter. We noticed a few days ago that Celsius was not only in tenterhooks for stETH, but also Wrapped Bitcoin on Ethereum (wBTC), a derivative product that allows Bitcoin holders to access the Ethereum DeFi ecosystem. Basically, it is an ERC-20 token that is fully backed by Bitcoin and managed by the WBTC Autonomous Decentralized Organization (DAO). wBTC can be exchanged for Bitcoin with a 1: 1 price ratio.

To find out, Celsius has about 17,900 wBTC in a dedicated vault. If the price of Bitcoin falls to a predefined threshold, the contents of the vault would be settled in a margin call. This scenario is quite profitable for individuals who mark such positions, as they then receive between 10 and 15 percent of the cut in the sale of collateral.

A few days ago, Celsius’ wBTC vault would be liquidated if the price of Bitcoin fell below $ 20,272. However, the company has been frantically depositing additional collateral, thus reducing the price at which the margin call is activated.

Source: https://oasis.app/25977#Overview

As things stand, the margin call trigger is around the $ 13,000 Bitcoin price level.

Some analysts continue to speculate that the recent decline in Bitcoin was, at least in part, motivated by the desire of a few players to provoke a margin call in Celsius wBTC holdings. However, as the company continued to find additional guarantees, the immediate threat was avoided for the time being. This probably played an important role in stabilizing the general sentiment around Bitcoin.

However, readers should remember that Bitcoin is not yet out of the woods. After all, you still have to complete the usual drop of 80 percent from the recent all-time high that is typical of the Bitcoin bear market.





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