One of Tether’s key partners halved its borrowings of the stablecoin in the months before the temporary loss of its dollar peg spread shockwaves through markets.
Celsius Network, a crypto lender with digital assets valued at $17bn, reduced its borrowings of Tether’s USDT stablecoin down to 500m before the recent market volatility, according to person familiar with the facility.
The person said the reduction had 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 customers the chance to earn much as 17 per cent on their digital assets.
The company raised $750m last year from traditional investors including WestCap and Caisse de dépôt et placement du Québec (CDPQ), Canada’s second largest pension fund.
Its borrowings of USDT from Tether were first revealed by Bloomberg last year. Celsius had borrowed $1bn 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 per cent of the stablecoin’s assets as of the start of this year.
“If bitcoin drops, they give us a margin call [and then] we have to give them more bitcoin,” Mashinsky told the FT in October. He said the loans were typically 30 per cent overcollateralised.
The price of bitcoin has since dropped by about half to $30,000. The person familiar with the matter said Celsius had indeed posted more collateral as a result of the falling price.
Asked for comment on the Celsius loan, Tether directed FT Alphaville to a reserves breakdown 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 in line with the broader crypto market decline. The company’s holdings are counted as an intangible asset on its balance sheet, according to accounts filed in the UK.
Celsius is by far the biggest holder of CEL tokens. CEL is currently trading at around 80 cents, which values Celsius’ holdings at $270m. It is a sharp decline from a peak value of $8 in June 2021 and down from $2 just a week ago.
Mashinsky has this week sought to reassure customers, tweeting on Wednesday: “Notwithstanding the extreme market volatility, Celsius has not experienced any significant losses and all funds are safe.”
Tether’s bitcoin-backed lending clashes with dollar promise — FT