The collapse of Celsius Network, once a major player in the crypto lending space, continues to ripple across the digital asset market. As part of its ongoing restructuring, the now-defunct platform has received court approval to liquidate its substantial holdings of altcoins—including major assets like Cardano (ADA), Polygon (MATIC), Solana (SOL), and its own native CEL token—sparking concerns over potential price volatility and downward pressure on already fragile markets.
Blockchain analytics firm Kaiko recently highlighted that Celsius holds over $24 billion in Bitcoin (BTC), Ethereum (ETH), stETH, and various liquid and illiquid altcoins. While some assets have already been transferred to entities like Paxos and Wintermute, the broader liquidation process remains a looming event that could significantly impact market dynamics.
Market Liquidity Under Pressure
Kaiko’s report underscores a critical issue: declining market depth. Since 2022, the liquidity for Celsius-held altcoins has dropped by 40%, with estimated trading depth at just $9 million in early 2025. This shrinking liquidity makes large-scale sales particularly risky, as even moderate sell-offs could trigger sharp price drops—especially for less-traded tokens.
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The situation is further complicated by the geographic concentration of trading activity. Over 60% of the order book depth for these altcoins resides on offshore exchanges like Binance, while only about 30% is available on U.S.-based platforms. This imbalance limits efficient price discovery and increases slippage risk during large trades.
The CEL Token Conundrum
Celsius’s native token, CEL, presents one of the most uncertain aspects of the liquidation. Accounting for over 65% of the company’s altcoin holdings, CEL has seen its value plummet by 83% year-over-year. With current market depth at a mere $300,000 and minimal trading volume outside of Bybit and OKX, any attempt to offload large quantities could devastate its price.
As of this writing, CEL trades at $0.1579 with a market cap of $68.6 million and a 24-hour volume of just $731,431. Despite a short-term rally—up 40.7% over two weeks and 62.27% year-to-date—the token remains 98% below its all-time high of $8.05 reached in May 2021.
"Ultimately, due to poor liquidity conditions, the liquidation of Celsius altcoins may exert short-term pressure on the broader crypto market," Kaiko noted.
Key Altcoins in Celsius’s Portfolio
Beyond CEL, Celsius holds significant positions in several high-profile altcoins:
- Cardano (ADA): Over 103 million ADA
- Polygon (MATIC): Approximately 90 million MATIC
- Solana (SOL): 161,000 SOL
- Chainlink (LINK): 33,000 LINK
- Polkadot (DOT): 18,000 DOT
- Litecoin (LTC): 200,000 LTC
- Aave (AAVE): 106,000 AAVE
These assets, once central to diversified crypto portfolios, have suffered steep declines amid prolonged bearish sentiment and regulatory uncertainty.
Altcoin Performance Amid Broader Declines
While Bitcoin and Ethereum dominate headlines, altcoins have borne the brunt of the market downturn since the 2021 peak. Global crypto market capitalization has dropped 60% from its $3 trillion high in early 2021, now sitting around $1.24 trillion.
Cardano (ADA)
ADA, currently ranked eighth by market cap, trades at $0.293—a far cry from its $3.10 ATH in September 2021. Though it’s up 20% year-to-date, it remains down 17.56% over the past year. Trading volume has also declined sharply, falling 166.69% in the last 24 hours alone.
Polygon (MATIC)
MATIC, valued at $6.9 billion, trades at $0.7376. It has gained traction recently with a 5.3% weekly increase and a 16.4% monthly gain, but remains down 2.95% year-to-date and a staggering 74.6% below its 2021 peak near $3.
Both ADA and MATIC have drawn scrutiny from U.S. regulators. The SEC has indicated it may classify them as securities—a move that could further limit exchange availability and investor access.
Ripple Effects on Ethereum Staking
Celsius’s actions aren’t limited to altcoin sales. In a move that affected Ethereum’s network operations, the company recently shifted large amounts of ETH into staking contracts. This influx worsened an existing backlog in validator queue activation times, now stretching to about six weeks.
After redeeming $813 million worth of staked ETH from Lido Finance, Celsius deposited an additional $745 million into Ethereum’s staking system within days—intensifying congestion on the network post-Shanghai/ Shapella upgrade, which enabled withdrawals of staked ETH.
In proof-of-stake (PoS) systems like Ethereum, validators lock up ETH to participate in block validation and earn rewards. A surge in staking demand—driven partly by entities like Celsius—can delay new entrants and affect decentralization metrics.
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Restructuring Under Fahrenheit
Celsius filed for Chapter 11 bankruptcy protection in July 2022 amid extreme market conditions and mounting losses from failed investments like Terra (LUNA). After a competitive bidding process, it selected Fahrenheit—a consortium backed by Arrington Capital, US Bitcoin Corp., and Proof Group—as the winning bidder to manage a new creditor-owned entity ("NewCo").
Fahrenheit will provide operational leadership, technology infrastructure, and capital to revive Celsius’s core lending and mining businesses under court supervision.
Regulatory Fallout and Legal Challenges
Celsius and its founder, Alex Mashinsky, now face escalating legal scrutiny:
- The Commodity Futures Trading Commission (CFTC) has concluded that Celsius operated illegally by failing to register as a commodities firm and misleading investors.
- The New York Attorney General (NYAG) has sued Mashinsky for making false claims about Celsius’s financial health and security practices.
- An independent examiner appointed by the court is investigating whether Celsius ran a Ponzi-like scheme.
Mashinsky resigned in October 2022, admitting regret over customer losses. However, reports emerged that he withdrew $10 million from a Celsius-linked wallet weeks before customer withdrawals were frozen—fueling allegations of insider misconduct.
Venture Capital Retreat Signals Broader Industry Strain
The collapse of Celsius reflects a wider trend: declining institutional interest in crypto startups. According to PitchBook, venture funding in the sector fell to $2.34 billion in Q2 2023—the fifth consecutive quarterly decline.
Notable exceptions include LayerZero’s $120 million Series B and Worldcoin’s $85 million Series C, but overall investment momentum has slowed due to regulatory headwinds and macroeconomic uncertainty.
Frequently Asked Questions
Q: Why is Celsius liquidating its altcoins now?
A: As part of its court-approved Chapter 11 restructuring plan, Celsius must convert non-core assets into more liquid forms like BTC and ETH to repay creditors.
Q: Could this liquidation crash altcoin prices?
A: While large-scale sales can cause short-term volatility, especially for low-liquidity tokens like CEL, coordinated execution through OTC desks may help minimize market impact.
Q: Is CEL still a viable investment?
A: Given its extremely low liquidity and association with a bankrupt entity, CEL carries high risk. Investors should proceed with caution.
Q: How does Celsius’s staking activity affect Ethereum users?
A: The sudden influx of staked ETH extended validator queue times, delaying entry for new participants but not impacting existing stakers’ rewards.
Q: Who benefits from Celsius’s restructuring?
A: Creditors and former account holders will own the restructured entity under Fahrenheit’s management, potentially recovering partial value over time.
Q: What happens to my Celsius account balance?
A: Account balances are being processed through bankruptcy proceedings; distributions depend on asset recovery and court approval timelines.
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