Celsius Unstakes Thousands of Ether in Potential Alleviation of ETH Selling Pressure

TL; DR

Celsius is set to unstake 206,300 ETH to redistribute to creditors.
The unstaking of 206,300 ETH may increase the coin’s selling pressure which pushes its price down.

After the approval of spot Bitcoin ETFs the price of ETH increased.

Introduction

In 2023 several crypto projects that include FTX and Celsius became insolvent and filed for bankruptcy. However, it often takes time to windup the bankruptcy process depending on whether or not the insolvent firm wants to restructure. As things stand, Celsius aims to restructure.

This post focuses on Celsius bankruptcy restructuring and debt clearance. We will also look at the effects of Celsius’ unstaking of ETH on its price.

Celsius’ ETH Unstaking Plan Gains Momentum

Celsius Network, the bankrupt crypto lender, recently announced that it will soon unstake a significant amount of ETH to facilitate the redistribution of assets to its creditors. That move is part of its restructuring process and a path to clear its outstanding liabilities.

The company wishes to raise funds to address the challenges it is facing including high costs incurred during the restructuring phase. Its financial woes worsened in July 2022 after it filed for bankruptcy Chapter 11.

On 4 January the company announced its plan to unstake Ether. It said, “Celsius will unstake existing ETH holdings, which have provided valuable staking rewards income to the estate, to offset certain costs incurred throughout the restructuring process.”

Source: x.com

It continued, “In preparation of any asset distributions, Celsius has started the process of recalling and rebalancing assets to ensure ample liquidity. Celsius will unstake existing ETH holdings, which have provided valuable staking rewards income to the estate, to offset certain costs incurred throughout the restructuring process.”

Celsius was clear in its announcement that it intends to pay off its creditors. Thus, it explained, “As a reminder, eligible creditors will receive in-kind distributions of BTC and ETH as outlined in the approved Plan.” According to its post on X, the company has more than 6,700 creditors.

The Nansen dashboard shows that Celsius has 206,300 ETH, valued at around $470 million, waiting to be unstaked. The following diagram shows the distribution of unstaked ETH.

The Distribution of Unstaked ETH – Nansen

As the diagram shows, Celsius owns about 32% of all unstaked ETH. Since it intends to sell ETH that may affect its price. Again, since 2023 the company has withdrawn 40,249 ETH.

Although Celsius’ restructuring process has been going well, some creditors have criticized the company for its failure to provide an exact date for the distribution of crypto assets. The following screenshot shows a recent comment pertaining to Celsius’ distribution of ETH and other cryptocurrencies.

Creditors Call for a Distribution Date - xDigitalAssetupd

The court has already approved a restructuring plan where the creditors will recover up to 79% of their crypto holdings. As per the plan, Celsius will distribute both bitcoin and ETH to its creditors. The next diagram shows Celsius Crypto Holding.

Celsius Crypto Holding – XCelsius

As you observe in the table, Celsius has various crypto assets that include BTC, ETH, CEL, Matic and USDC. In the meantime, the court has allowed selected users to withdraw part of the crypto assets until 28 February.

Factors Contributing To Negative Sentiments about Ether

The crypto community has mixed feelings about Celsius’ unstaking of a large quantity of ETH as that may affect its price. Some analysts have said that selling a lot of ETH at once or within a very short period may result in high selling pressure which may lead to the price for ETH to fall.

Some analytical charts indicate a possibility of a sharp Ethereum price drop to below $1,895, which is a critical support level. That sharp price fall may only be averted if there is a dramatic increase in the number of investors willing to purchase ETH. The market sentiment will also likely to influence the direction the ETH price will take after the sell-off and redistribution.

In December, CryptoSlate reported that the crypto lender sold cryptocurrencies worth $250 million within 30 days. As noted, whereas other institutional investors opt to stake ETH Celsius is unstaking and selling much of its holdings.

Also, when Celsius finally distributes the coin to its creditors some may sell it which may force the ETH price to fall. This is because its supply will increase while few investors will be ready to buy Ethereum. Some observers have hinted that Celsius is selling part of its crypto holdings to raise funds to invest in bitcoin mining.

An x.com user by the name @Carlini8NFT has described Celsius’ move as dumbing ETH on the market which implies a possible negative effect on Ethereum price.

Crypto Degens may Purchase ETH in Large quantity - X@Carlini8NFT

Despite the current uncertainty in the Ethereum market some analysts think that the Celsius move to unstake ETH is a positive development. Such a move will bring relief to its creditors who may use their ETH holdings in the way they want. Some of them may even choose ETH staking as well.

Posting on x @Wazzycrypto said, “I don’t think you guys understand how much weight will be lifted off $ETH when Celsius vampires finally ‘go’ into oblivion and redistribute what’s left. Held more than $800M $ETH, were one of the biggest stakers and been consistently selling $20M/week on the market for months.”

Source: x.com

Although there has been much negative sentiment about ETH based on the impending large scale ETH unstaking there are several factors that may also drive its price up. After the approval of several spot bitcoin ETFs the price of ETH and Ethereum based tokens surged. The reason is that the market now expects the SEC to approve spot Ethereum ETFs.

Secondly, Vitalik Buterin, Ethereum co-founder’s, proposal to raise Ethereum gas limit was well-received on the market resulting in recent ETH price rise. The developments have set a stage for more investors to buy ETH which may drive its price up.

hbar crypto

As part of its restructuring process, Celsius will soon unstake its ETH holdings to distribute it to creditors and to raise funds to cover its costs. However, some analysts believe that unstaking ETH will result in a significant fall in its price. On the other hand, other factors like the proposed increase in Ethereum gas limit and the prospect of the SEC approving spot ETH ETFs may stabilize the price of the coin.

FAQs about Celsius

What is Celsius?

Celsius is a legal lending platform that allows users to earn interest on the cryptocurrencies they deposit with it. However, Celsius is undergoing restructuring since it declared Chapter 11 bankruptcy in July 2022.

Why Celsius went bankrupt?

The collapse of Terra USD created financial constraints on Celsius due to the contagion effect. Specifically, the company had a deficit of $1.2 billion after it suffered a digital version of a bank run. The key causes of the run were a prolonged crypto winter and hostile media coverage.

Author: Mashell C., Gate.io Researcher

*This article represents only the views of the researcher and does not constitute any investment suggestions.

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