Celsius Network Flow of Funds

DataFinnovation - ChainArgos - 4AC
Published in
4 min readJan 6, 2022


Previously we have discussed collateralized crypto lending and potential implications for prices. It is difficult to get collateral quantity or haircut data for private lenders to help estimate parameters for models. Fortunately Celsius publishes some flow-of-funds data that can help.

This version updates with data through 30-Dec-2021 and some corrections. Prior post at https://datafinnovation.blogspot.com/2021/12/celsius-network-flow-of-funds.html, blog moved here.

Celsius’ Own Data

Celsius provides weekly updates, via Twitter at least, going back about 1 quarter*. Here’s one example. There is some daily data prior to that. For now let’s just focus on the weekly numbers for Sep through Dec 2021. Here they are:

Weekly data from Celsius’ Twitter account.

Taking prices from Yahoo Finance we get approximate USD amounts as:

Weekly data multiplied by Yahoo Finance closing prices.

Here we can see gross inflows of 955mm and net of 476mm. That tells us there is an outflow of ~500mm somewhere. If we assume this is stablecoins flowing out as loan proceeds we get an approximate average LTV of 50%.

That tells us a lot! First we know that Celsius consumed approximately 500mm in funding during the quarter. This is simply applying arithmetic to their own numbers.

Second, we can make a simple model of the business. Let’s simplify for the rest of this discussion and pretend all the collateral is BTC. They pay ~3pct on BTC deposits and earn ~8pct on stablecoin loans for half the amount. Source data here.

If this entire activity is funded by equity this is a simple, positive carry business with a large need for short term funding. Whether that equity has much value is unclear…but that is a separate question. Recent equity raises are for these kind of amounts suggesting this is precisely what is happening.

Celsius’s equity investors are basically financing their loan book. That is not a Ponzi scheme! Obviously it’s not possible to confirm this without seeing the whole balance sheet. But there is no public evidence they are raising copious amounts of debt financing. The UK corporate filings do not suggest a tremendous amount of debt.

To the extent these loans are non-recourse the risk is a collapse in the collateral value. They have something like a stop-loss for 20k BTC at a price of 25k from this quarter’s lending (20k * 25k = 500mm).

If their total assets are 20b — as suggested elsewhere and vaguely consistent with 1b quarterly increments — and prior quarters look like this one the total is 400k coins. Whether you think that is a reasonable stop-loss order is outside the scope of this discussion.

This is a simplified analysis of course. But it illustrates how the word “Ponzi” is misused all over the place. Celsius is a positive carry financing business, with a huge need for short term funding and a balance sheet running a large asset-liability mismatch. But that is hardly a new thing in finance.

Celsius’ Business Model

What we have here is a pretty standard financing business. They are buying stablecoin denominated consumer debt with a high yield. They are issuing crypto-denominated lower yielding debt. And they are financing any cashflow needs by selling equity.

If we consider CEL tokens as equity (functionally — this is not a blog about securities law) then no separate analysis is required on the funding side. Issues have been raised regarding the tokens. As far as we are concerned here that is just another way of raising equity. On the available information this looks like a bog-standard carry trade funded by equity.

To some extent this kind of high-yield consumer lending is new in that the backing is crypto collateral. Rather than doing any credit analysis Celsius instead relies on liquidity in the underlying to provide a guarantee of repayment. This bears similarities to housing-backed lending pre-2008 but is not the same. There the assumption was “you can always refinance.” Here the assumption is “you can always sell with low slippage.”

Is This Ok?

Yes this might be a problem. Yes it might look a bit like a SIV. Yes it would be a problem if assets were lost to hacks or mismarked. Yes the equity might be worthless (it’s equity!). But, absent more information, it’s not a Ponzi. It is quite literally a shadow bank funded almost entirely by equity.

In some ways this is more honest than TradFi: here the equity holders get hit and then the depositors. The taxpayer is nowhere to be found. And nobody is holding implicitly-guaranteed debt. You can say many things about Celsius’ management — but they have always been clear these are risky lending activities.

* Yes this isn’t precisely Q4 but it’s close enough.