Tether reveals how it returned funds to Celsius following liquidation News ▸ Bitfinex ▸ Celsius ▸ Bitcoin ▸ Stablecoins
Tether reveals how it returned funds to Celsius following liquidation
A BTC loan to Celsius was liquidated "without loss" by Tether. The process resulted in excess funds being returned to Celsius as Tether aimed to "minimize" the effect on the market
2 min read
Updated: Jul. 9, 2022 at 2:32 am UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
On June 15, Paolo Ardoino, CTO of Tether and Bitfinex, disclosed that Tether had liquidated a loan given to Celsius “without loss.” Tether has confirmed the liquidation process and revealed that it “returned the remaining part [of the loan] to Celsius.”
Tether also affirmed that it “reconfirmed in writing before the start of the liquidation event” the decision to liquidate the loan.
Ardoino also added that the liquidation was “carried out in a way to minimize… any impact on the markets.” This may have been through OTC trades, adding to a hedged position, or possibly increasing the new of Bitcoins in its reserves.
The fact that the loan was liquidated without loss is the result of the loan being overcollateralized by 130%. This action means that Tether had 30% more Bitcoin held as collateral than the stablecoins it loaned to Celsius.
"This process was carried out in a way to minimize as much as possible any impact on the markets and in fact, once the loan was covered, Tether returned the remaining part to Celsius as per its agreement. Celsius position has been liquidated with no losses to Tether." https://t.co/K1cBkaQWWI
— Paolo Ardoino (@paoloardoino) July 8, 2022
If Tether required a lower level of collateralization, it could have made a loss within the current turbulent and volatile market. However, Ardoino confirmed that the loan was liquidated while it was still above 100%. This means that even with high slippage due to low liquidity, Tether would have been able to exit the position safely.
Incorrect. Liquidation happened when while the price was well above 100% and in fact Tether returned the excess to Celsius.
— Paolo Ardoino (@paoloardoino) July 8, 2022
Further, Tether guaranteed that its exposure to Celsius through “an investment” represents a “minimal part” of its equity and has no impact on Tether’s reserves.
Tether’s blog post also contained a damning paragraph targeting overleveraged lenders. In contrast to Tether’s 130% collateralization,
“other lenders including notable names in the space were blatantly providing lending facilities with nearly zero collateral. This goes against the strict regulatory practice that the industry has set as standard.”
It ended with a sentence akin to something Ardoino would tweet out to his followers, proclaiming that “critics who make claims of Tether’s inconsistencies have no understanding of how lending, borrowing, and risk management work.”
Mentioned in this article
Author 
Liam 'Akiba' Wright
Also known as "Akiba," Liam Wright is a reporter, podcast producer, and Editor-in-Chief at CryptoSlate. He believes that decentralized technology has the potential to make widespread positive change.
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Tether
$0.99941
Launched in 2014, Tether is a blockchain-enabled platform designed to facilitate the use of fiat currencies in a digital manner.
Bitcoin
$97,504.42
Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
Bitfinex
Bitfinex is a digital asset trading platform offering state-of-the-art services for digital currency traders and global liquidity providers.
Paolo Ardoino joined Bitfinex at the beginning of 2015 and now serves as Chief Technology Officer.