Of the major bankruptcies that occurred last year, Celsius is the current name. In total, the crypto platform is estimated to owe $4.7 billion (24 billion R$) to more than 100,000 creditors.
In the process of recovery since July last year, in the so-called Chapter 11, Percentage drew attention this Tuesday (24) by proposing to create a new token to settle its debts. In other words, it would be like making money – something that has no value – and hoping someone would accept it.
The idea sounds crazy, but it has worked in the past with other companies. The biggest example of this is Bitfinex. The exchange, which was hacked in 2016, created the BFX token, and distributed it 1:1 to its customers for every dollar lost.
In addition to making Bitfinex’s plan work, keeping it active and avoiding bankruptcy, the US later recovered a large portion of the nearly 120,000 stolen bitcoins, the equivalent today of R$13.8 billion. However, the amount was not returned by the US government.
Coming back to the case of Celsius, the platform that provided profits to its clients already has a token of the same name, with the acronym CEL. Although its price is 92.5% below its all-time high, it is worth noting that other projects that are still alive have shown similar declines during the most recent bear market.
Celsius wants to create another cryptocurrency to pay off debts
According to information from Bloomberg, the creditors themselves are pushing for the idea to move forward. After all, everyone has their cryptocurrency – or what’s left of it – trapped on the Celsius platform.
However, such a motion must be approved by Judge Martin Glenn, who is in charge of the case. Furthermore, the creditors themselves must vote in order for this to happen.
Therefore, even if it is not the right solution, the company can speed up the entire judicial recovery process. However, the biggest challenge may come later. After all, the percentile will need to show revenue, which is hard to do.
For example, mining company Core Scientific — which also declared bankruptcy — shut down 37,000C of mining equipment earlier this year, citing that the latter owed it nearly R$40 million in energy costs.
Investors are self-custodial
If the latest bear market proves anything to investors, it’s that size that doesn’t matter. The largest bitcoin mining company went bankrupt, the second largest exchange proved to be a scam, and countless other multi-billion dollar crypto companies went the same way.
So there is no such thing as “too big to fail” here. Therefore, investors should keep their cryptocurrency in self custody. After all, convenience and small returns can be very attractive, but they are also very dangerous, and it is not worth the risk and return.