Major cryptocurrency players, including Celsius CEL/USD, 3AC, and Tether USDT/USD, have experienced major liquidations.
What Happened: Given the sharp fall in cryptocurrency prices, lending firm Celsius posted a total of 7,206 WBTC WBTC/USD as collateral to reduce its liquidation price to $16,582. Celsius’ complete position being sold would lead to over $500 billion worth of Bitcoin being sold off in the open market.
3AC, or 3 Arrows Capital, also faced illiquidity. The large-scale crypto lending and borrowing firm manages hundreds of thousands of Ethereum ETH/USD. Illiquidity and insolvency implicate a major difference between the funds owed to investors and the capital they’d receive in the case of liquidation of their collateral.
Finally, Tether also experienced an outflow of $1.6 billion worth of funds due to FUD (fear, uncertainty and doubt) surrounding the stablecoin, including its collateralized reserves, commercial paper holdings and the overall direction of the cryptocurrency market.
Why It's Important: There is extreme sell-off pressure across the market, which drives down token prices. Major lending and borrowing firms, as well as cryptocurrency issuers and other institutions, have experienced liquidity problems as they face margin calls and potential liquidation of major positions in the open market. However, numerous institutions have responded effectively and further collateralized their positions, reducing their liquidation price. If Bitcoin’s price continues to fall, institutions will be cutting it too close to complete liquidation, which would further slam the market.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.