Wall Street is officially entering the distressed crypto business.
One week after DeFi shadow bank Celsius halted redemptions in an attempt to prevent an all too TradFi bank run, in the process sparking a historic rout across cryptocurrencies sending bitcoin as low as $18,000 as cubic zirconium hand HODLers turned to FODLers, it now appears that Goldman is aggressively seeking to muscle its way into the crypto industry and according to CoinDesk, Goldman is raising $2 billion from investors to buy up distressed assets from the crypto lender.
The proposed deal would allow Goldman and its investors to buy Celsius assets at significant big discounts in the event of a bankruptcy filing, a bankruptcy which appears almost assured after Celsius hired restructuring advisory firm Alvarez & Marsal, the Wall Street Journal reported Friday afternoon.
According to the report, Goldman Sachs appears to be gauging interest and soliciting commitments from Web3 crypto funds, funds specializing in distressed assets and traditional financial institutions with ample cash on hand; and in light of the aggressive bail out by the like of cash-rich industry participants such as FTX, coupled with the recent stabilization in the price of cryptos, we anticipate Goldman won't have too much difficult
As a reminder, on June 12, Celsius, which had more than $8 billion loaned out to clients and $12 billion in assets under management as of May of this year, abruptly announced it would stop withdrawals from its platform, citing “extreme market conditions.” The disclosure exacerbated those conditions, briefly sending bitcoin’s price below $20,000 (it has since bounced 20% from its cycle lows).
In addition to hiring A&M, Celsius has tapped restructuring attorneys from law firm Akin Gump the Wall Street Journal reported earlier this month. Global investment bank Citigroup has also been enlisted by Celsius to advise on possible solutions, including an assessment of an offer from rival crypto lender Nexo, The Block reported.
According to CoinDesk, both Citigroup and Akin Gump have recommended that Celsius file for bankruptcy, which would make Goldman's potential stalking horse bid a reality. Then again, Goldman's involvement and effective takeover of Celsius may explain the recent surge in the Celsius token.
And yes, those saying that Wall Street's creeping penetration of the crypto space will further dilute its libertarian purity, are probably right although one can make that argument when virtually every VC decided to go all in on eth3. And yes, while Goldman becoming a major player in the DeFi space will anger some, the fact that the world's most powerful bank implicitly backstops the crypto space will be just what the bitcoin and ether dip buyers want.