• Investors continue to fear for their savings in Celsius bankruptcy
• Bitcoin mining continues despite high costs
• Bitcoins mined should contribute to financial stability in the long term
It came as a shock to many crypto investors when crypto lending service Celsius Network first imposed a payment freeze in June and then finally filed for bankruptcy a month later. In the course of the bankruptcy declaration process, the crypto company revealed a multi-billion dollar hole in its balance sheet. At the same time, Celsius CEO Alex Mashinsky said in the bankruptcy documents that the service provider had approximately $170 million in cash reserves to be used to keep operations running through a major restructuring process, while also serving to ” restore activity on the platform” and “return value to customers”.
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With its current debt burden, Celsius Network expects to run out of cash by October. Court documents show that the crypto lender estimates that it will lose around 80 percent of its liquidity in August and September.
Bitcoin mining has continued since the bankruptcy was declared
Since filing for bankruptcy on July 13, Celsius CFO Chris Ferraro would have used his remaining cash reserves to cover ongoing expenses, a Wall Street Journal report, referring to a creditor meeting on August 19, 2022, reveals. which included utility bills from his own bitcoin miners. In a financial report from mid-August, the company revealed that it had spent around 40 million US dollars since declaring bankruptcy. Despite this, Celsius does not plan to shut down or monetize its mining equipment. Ferraro had defended continued Bitcoin mining. Thus, the crypto lending company would be confident that the prospecting operations would ultimately bring in more money than the sale of the assets could. This is currently due to the high market saturation for prospecting equipment, the value of such systems has fallen. In contrast, Celsius expects cryptocurrency mining to return to profit by January.
Ferraro also said that the newly mined bitcoins should be used to plug the multi-billion dollar hole in the balance sheet. Celsius Network currently owes more than $4.7 billion to investors who have put their savings into the crypto lender.
Specifically, the CFO estimates that the financial service provider should mine 10,118 bitcoins in 2022 and 15,000 BTC in 2023. In 2021, Celsius only mined 3,114 Bitcoin. In total, the company has paid for 120,000 prospecting rigs, but only 49,000 of these are actually in use.
Judge grants permission to sell bitcoins to cover costs
This was preceded by a decision by Judge Martin Glenn, who presided over the case. He had given permission for mined bitcoins to be sold in order to compensate for the losses of daily operations. Incidentally, Celsius’ prospecting subsidiary, Celsius Mining, was also declared bankrupt in the course of the bankruptcy proceedings. However, no bitcoins have been sold since the bankruptcy declaration. Still, Judge Glenn also estimates that the ongoing prospecting operations should benefit creditors in the long run as it would be a way to restore the company’s financial stability.
Celsius investors unite
Celsius investors have not been idle during the course of the bankruptcy either. As EndoTech boss Anna Baker explains to Cointelegraph, the crypto lender has not only built a crypto lending company, but also created a strong community: “Celsius has built more than a lending machine. It has a strong community of motivated creditors. This is an example of a company that has been very aggressive and successful in its acquisition efforts but a little more haphazard in its risk management. Its ‘tribe’ of creditors is optimistic but is facing the harsh realities of its risk management and bankruptcy .”
For the Celsius community, it looks like they come together through various channels via Reddit forums, Twitter or Telegram and agree on joint purchases of the CEL token under the hashtag “CELShortSqueeze” in order to increase its value and ultimately Pushing short sellers out of the cryptocurrency, which also drives the price of the cybercurrency up. However, various financial experts doubt that this measure will lead to an increase in the value of the CEL token in the long term. In the short term, however, the strategy has already shown initial success. The CEL token has risen to over one dollar from its annual low in June at $0.1554.
Editorial office finanzen.net
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