At this point, it is no longer news that Celsius has emerged from bankruptcy. Recall that the crypto lending platform filed for Chapter 11 in June 2022. This establishment struggled to pay its creditors and had to freeze withdrawal requests. The re-emergence of the Celsius Network is enough evidence that Bitcoin is future-proof, regardless of the turnout of events.
However, the “Celsius Miracle” is not exactly some supernatural event or divine information. Necessary mechanisms had to be in place and decisions made to make this return possible. This article will review the situation behind the resurrection of this platform and how it correlates to the future of Bitcoin.
Celsius Network is a Bitcoin or crypto lending platform that enables individuals to take crypto-collateralized loans or earn passive income from contributing to the ending pool. While the company filed for bankruptcy in June 2022, the build-up to that collapse started way before that. To understand what happened, we must go as far back as November 2021.
Bitcoin started a steady decline from almost $70,000 at that time to as low as $17,000 in December 2022. Like with every market cycle, the prices of altcoins equally dropped. Tokens went from reaching ATHs to losing as much as 300% of their value. Simply put, it was a proper bloodbath. Enough with the history lessons, what is the relationship between the crypto winter and the Celsius Network Bitcoin lending scheme?
As mentioned earlier, people took loans against “crypto collateral”. This means that Celsius Network could confiscate the Bitcoin of a borrower if they fail to pay their loan. Crypto lending platforms typically gauge the amount people can take by valuing the tokens they are putting down as collateral at the time of taking this loan. In addition, loans were funded by lenders who also got a percentage of the interest.
The problem is that this system does not cover for drastic drops in prices of cryptocurrencies like what happened between November 2021 and December 2022. There was no way that Celsius Network could have created a system that would prevent Bitcoin from losing 400% of its value. Considering this outcome, it is easy to see why Celsius Network struggled to pay creditors and had to pause withdrawal.
On the 31st of January 2023, Celsius Network issued a press release that it has begun paying off $3 Billion of Bitcoin and other cryptocurrencies to its creditors. This is part of the requirements to re-emerge from Chapter 11 bankruptcy. While the company has to navigate certain regulatory frameworks, the proceedings are well underway, with the majority of stakeholders agreeing to the new initiative.
Meanwhile, Celsius Network is not working alone in distributing outstanding Bitcoin payments. The crypto lending platform is collaborating with UCC and certain federal and state regulatory agencies. It wants to ensure secure, timely, and fully compliant repayments of outstanding debts.
To settle stakeholders and restart operations, Celsius Network auctioned off its reorganizable operating business. Funds gotten from this sale will serve both for settling off creditors and starting a Bitcoin Mining company – Ionic Digital. Current creditors will hold equities to this new venture as compensation for any inconvenience they may have suffered from the Chapter 11 process.
This initiative, called – “The Plan,” was put forward by the board tasked with steering the company away from bankruptcy. Most of the shareholders approved this enterprise, and it is easy to see why these individuals supported it. Bitcoin mining is the process of verifying Bitcoin transactions and earning Bitcoin as rewards in return.
This new venture is more secure and stable, especially when compared to crypto lending. The business does not rely on people repaying their loans to make a profit or sustain operations. In addition, people will own equity and not just tokens. Since people have equity and not crypto, temporary drops in the prices of tokens will not have any serious consequences on business operations. In all, the idea seems balanced, less risky, and achievable.
The Celsius Network is proof that Bitcoin and blockchain technology are future-proof. Since the advent of this technology, there have been several questions about everything related to it. Critics have questioned its security, sustainability, utility, and general value. In 2021, the CEO of JPMorgan Chase – Jamie Dimon, said that “Bitcoin is worthless”.
Despite the incessant attacks and stumbling blocks, decentralized technology and Bitcoin have proven to be “immortal.” Clear examples are recent cases of the Bitcoin Spot ETF approval and the local Bitcoin rental agreement in Argentina. There are also professional athletes earning Bitcoin as their salary, commission, and other bonuses.
Even Tectum, the fastest layer-1 blockchain in the world that is making Bitcoin spendable, has been making significant mainstream moves. It has recently onboarded numerous businesses like Iron Viking Gym, Straight Edge Landscape, etc., as SoftNote Merchants. The company is also developing SoftNote Pay, which will support enterprises that adopt their solution.
SoftNote Pay is an electronic Point-of-Sale (ePOS) solution that enables companies to transact with customers globally. Merchants who adopt this solution will enjoy the following benefits:
As mentioned earlier, the re-emergence from Chapter 11 was not just some magic conjuring that happened because someone waved a wand. Certain structures had to be put in place and decisions made for Celsius Network to come out of bankruptcy and launch a Bitcoin mining operation. The first factor is transparency.
Despite experiencing that setback, this establishment was still very transparent in its proceedings. Unlike many other crypto firms that folded during the crypto winter, Celsius did not have a history of mismanaging user’s funds. It was obvious enough that its problems were due to the significant drop in token prices, making it unable to pay creditors back their capital or profits.
In addition to being transparent, there was significant stakeholder involvement. Before “The Plan” was initiated, the interim board presented their ideas to the creditors for approval;l. They did not just assume it was a good initiative and force it on people. Considering how transparent Celsius has been with proceedings, it is unsurprising that the majority of stakeholders adopted the proposal.
Budding projects can take a cue from Celsius in terms of operations and community engagement. Blockchain startups should be very straightforward with their dealings and not abuse user’s trust or tamper with funds. If a firm has a clean slate with community members and other stakeholders, they have a better chance of getting the required support during setbacks.
