Celsius could repay all claims if BTC, ETH prices doubled – Simon Dixon

Celsius could repay all claims if BTC, ETH prices doubled - Simon Dixon

The Blockchain Industry: Celsius and the Battle Against Bankruptcy

The blockchain industry has witnessed its fair share of ups and downs, with various companies grappling with financial challenges. One such company is Celsius, a crypto lender currently embroiled in a Chapter 11 bankruptcy battle. However, a recent estimate by the Bank of the Future offers a glimmer of hope for Celsius and its creditors. According to the estimate, if the prices of Bitcoin (BTC) and Ether (ETH) – the two assets held by Celsius – were to double their current market prices, the troubled lender could potentially repay all the claims made against it.

Simon Dixon, the founder of Bank of the Future, a crypto-focused investment firm, shared this estimate via a tweet. He noted that the estimation was based on imperfect knowledge and was made by the Bank of the Future’s internal investment banking team without access to privileged information. Nevertheless, the estimate provides an interesting perspective on the potential recovery for Celsius.

The Potential Repayment Scenario

Under the final deal with the Fahrenheit consortium, which won the bid to acquire Celsius’ assets in May, the following price levels for BTC and ETH would enable Celsius to repay all its claims:

  • BTC price: $54,879
  • ETH price: $3,750

Reaching these price levels would generate enough value from the appreciation of both assets to cover the outstanding claims. In an effort to maximize asset value, Celsius appealed in court to convert all its altcoins into Bitcoin and Ether in June.

Estimated price of BTC and ETH for full recovery

Estimated price of BTC and ETH for full recovery. Source: Twitter

Restructuring Plans and Recovery Comparisons

The new restructuring plan proposed by the Fahrenheit consortium includes various strategies such as mining, institutional loans, and investments valued at approximately $1.4 billion. Additionally, $450 million in liquid crypto assets will contribute to the recovery process. In a bid to provide further context, Celsius compared Fahrenheit’s recovery plans with the wind-down plans of the Blockchain Recovery Investment Consortium (BRIC), a holding company affiliated with Gemini Trust, owned by the Winklevoss twins.

According to Celsius, the total recovery under BRIC’s orderly wind-down amounts to $3.519 billion, which exceeds the total assets available at $3.417 billion. This discrepancy is attributed to variable costs. In contrast, Fahrenheit’s recovery plan offers a recovery estimate of approximately $3.417 billion, aligning with the available assets.

Comparison between Fahrenheit plan and BRIC wind down

Comparison between Fahrenheit plan and BRIC wind down. Source: Twitter

Recovery Distribution and Equity Considerations

Considering the distribution of recovery, Celsius highlights some key differences between Fahrenheit’s plan and BRIC’s orderly wind-down. The return to retail borrowers is estimated to be approximately $339 million. Bank of the Future’s estimates suggest a recovery rate of approximately 65% for both options, which could potentially increase to about 75% if 10% of claims remain unclaimed.

Under Fahrenheit’s plan, 41.4% of the recovery is in equity, with the remaining 58.6% in liquid crypto assets. In contrast, only 12.4% of the recovery under BRIC’s orderly wind-down is in equity, with the remaining 87.6% in liquid crypto assets. These differences highlight the varying approaches taken by the two consortia in distributing the recovered assets.

The Importance of Timely Action and Avoiding “Rug Pulls”

Simon Dixon emphasizes the need for creditors to act swiftly and aim to exit the bankruptcy proceedings before the end of 2023 or before BTC and ETH reach the estimated price levels. He warns against the possibility of a “rug pull” and emphasizes the importance of fighting against such a scenario if it arises. This demonstrates the need for proactive measures to protect the interests of all stakeholders involved in the bankruptcy proceedings.

In conclusion, the blockchain industry continues to evolve, with companies like Celsius facing financial challenges and seeking ways to repay their creditors. The estimate provided by the Bank of the Future offers a potential path to recovery for Celsius, contingent upon the doubling of BTC and ETH prices. As the industry navigates this complex landscape, it is crucial for stakeholders to remain vigilant and take decisive actions to safeguard their investments.

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