Decrypting DeFi is Decrypt’s DeFi email newsletter. (art: Grant Kempster)
One of the best parts of DeFi is its transparency, and recent events in the lending market have made that abundantly clear. Everyone in the market can see who’s borrowing what, how much they’re borrowing, and, perhaps most importantly, at what price level they face liquidation.
Compare this to various deals Three Arrows Capital conducted with partners, some of which reportedly were made without any collateral and based solely on the good word of the 3AC crew. (Oops.)
During the current crypto crash, it was also interesting to see how liquidation mechanisms within DeFi operated automatically. There were no backdoor deals to save positions, and all the rules, like the loans made, were fully transparent.
Say you want to borrow Wrapped Bitcoin (WBTC) on Aave. You’ll have to be acutely aware of the 80% liquidation threshold, no matter whether you’re the biggest hedge fund in the world or a college student in Mumbai. Rules are rules.
With this in mind, you also can equip yourself with ways to measure the health of large lenders. We can identify wallets for these platforms and watch as they creep toward liquidation (or add more collateral to avoid the worst).
This week, we got a first-hand look at how Celsius slowly but surely topped up several of its DeFi positions.
After collecting the various crypto wallets belonging to the lender (11 have been identified on Etherscan), we then created an ApeBoard of activity across all of these addresses. ApeBoard is a handy visualizer for crypto wallets—instead of just using Etherscan and following strings of letters and numbers, the platform shows a bit more clearly how wallets are operating.
It looks something like this:
Total value of Celsius’s 11 crypto wallets. Source: ApeBoard.
This tool is also handy because we can see which tokens they hold in large amounts (looks like Lido’s Staked Ethereum and Wrapped Bitcoin were favorites of Celsius), which protocols these wallets are primarily using (Aave and Compound rank high), and how much debt these wallets contain.
First up, we can see that this collection of wallets has a net worth of more than $1.3 billion. We can also see that it has debt of more than $258 million.
A quick scroll down the dashboard indicates that this debt is split between Compound and Aave in borrowed DAI and USDC.
Let’s dive into that Aave and Compound activity. After all, a little more than 50% of all of these wallets’ tokens are held between these two protocols. And, more importantly, digging into this is relevant to a company that’s had withdrawals paused for a little more than three weeks.
The history tab of the cumulative crypto transactions for this wallet indicates that one of Celsius’s wallets this week paid back roughly $50 million in loans to Compound in three transactions: here, here, and here. On July 3, it appears Celsius also paid back another $50 million USDC loan to Aave.
That’s a little more than $100 million in debt repayment just this week. Clearly, Celsius is scrambling to get its books in order. But whether it will come out on top or simply delay the inevitable remains to be seen.
And while the above wallet analysis might be compelling for Celsius users, a recent report suggested Sam Bankman-Fried looked at the company’s books and decided it was beyond saving. Obviously, we’re not seeing the whole picture just from looking at wallet data on ApeBoard.
Tread carefully, folks. There’s a strong chance that this summer’s bear market may very well just be getting started.
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