Crypto lender’s Tether loan cut in half

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One of Tether’s main partners halved its stablecoin borrowing in the months before the temporary loss of its dollar peg sent shockwaves through the markets.

Celsius Network, a crypto lender with digital assets valued at $17 billion, reduced its borrowing of USDT stablecoins from Tether to 500 million ahead of recent market volatility, according to a person familiar with the setup.

The person said the reduction occurred in line with reduced demand for USDT from Celsius customers. Celsius had no immediate comment.

Celsius, which is led by Alex Mashinsky and counts Tether as an equity investor, is a major player in the DeFi space and offers clients the opportunity to earn up to 17% on their digital assets.

The company raised $750 million last year from traditional investors, including WestCap and the Caisse de depot et placement du Quebec (CDPQ), the second largest pension fund in Canada.

Its USDT borrowings from Tether were first revealed by Bloomberg last year. Celsius had borrowed $1 billion worth of USDT, pledging bitcoin as collateral in return.

The facility is recorded in Tether’s reserves under the secured loans category, which made up 5.3% of the stablecoin’s assets at the start of this year.

“If bitcoin goes down, they give us a margin call [and then] we need to give them more bitcoin,” Mashinsky told the FT in October. He said loans are typically 30% over-collateralized.

Bitcoin’s price has since fallen by about half to $30,000. The person familiar with the matter said Celsius had indeed posted more collateral due to lower prices.

Asked to comment on the Celsius loan, Tether directed FT Alphaville to a breakdown of reserves on the stablecoin’s website. “The value of Tether’s reserves is published daily,” a spokesperson said.

Celsius has its own token, called CEL, which has come under pressure due to the broader crypto market decline. The company’s holdings are recorded as an intangible asset on its balance sheet, according to accounts filed in the UK.

Celsius is by far the largest holder of CEL tokens. CEL is currently trading at around 80 cents, which values ​​Celsius’ holdings at $270 million. This is a steep decline from a peak value of $8 in June 2021 and from $2 just a week ago.

Mashinsky this week sought to reassure customers, Tweeter Wednesday: “Despite the extreme market volatility, Celsius suffered no significant losses and all funds are safe.”

Related links:
Tether’s Bitcoin-backed loans come up against dollar promise – FT

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