In a low-liquidity environment, the heavy selling of altcoins by Celsius, a bankrupt crypto lender, may have far-reaching consequences for the market. Kaiko’s latest research report sheds light on this concerning trend.
Last week, Celsius received court approval to convert its altcoin holdings into more liquid assets, such as BTC and ETH, as part of its restructuring plan. Wintermute, a market maker, and Paxos, a stablecoin issuer, are reportedly facilitating this conversion.
Concerns Surrounding Celsius’s CEL Token Liquidity
As of March, Celsius held over $2 billion worth of BTC, ETH, stETH, and a mix of liquid and illiquid altcoins, including $240 million of its own CEL token. However, the valuation of these holdings based on USD remains unclear.
Most of Celsius’ altcoins have experienced a steady decline in value since the company filed for bankruptcy a year ago. While Bitcoin Cash (BCH) and Litecoin (LTC) saw surges in June, primarily due to the launch of the institutional exchange EDX, Celsius’ other holdings suffered losses ranging from -84% to -6% over the past year.
CEL, which accounted for over 65% of Celsius’ altcoin holdings, plummeted by 83%, surpassed only by SRM, which saw an 84% year-over-year drop.
Given the diminishing liquidity for these tokens over the past year, the impact of Celsius’ altcoin liquidations could be substantial. The aggregated market depth for Celsius’ altcoin holdings has declined by 40% since 2022, amounting to approximately $90 million in early July.
Court documents reveal that Celsius holds altcoins worth significantly more than $90 million, posing challenges for liquidation without incurring substantial price slippage. Over 60% of the altcoin market depth is concentrated on Binance and other offshore exchanges, while 30% is on U.S. exchanges.
The primary concern lies with Celsius’ CEL token, which currently exhibits minimal liquidity based on market depth, amounting to just $30,000. This liquidity is primarily concentrated on OKX and Bybit.
Liquidating these altcoins without incurring high price slippage poses a significant challenge for Celsius. Over 60% of the altcoin market depth is concentrated on offshore exchanges like Binance, with an additional 30% on U.S. exchanges.
The potential fallout from Celsius’ altcoin liquidations could pressure the broader cryptocurrency markets, especially considering the current low-liquidity environment. However, as altcoins experience increased selling pressure, the short-term outlook for the market remains uncertain.
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