Fears of crypto infection spread after Celsius Network halts withdrawals

Author: Nishu June 14, 2022

Fears of crypto infection spread after Celsius Network halts withdrawals

The move by Celsius on Monday plunged cryptocurrencies for the first time since January 2021, taking their value below $1 trillion, raising concerns that the route could spread to other assets or affect other companies.

The move by Celsius on Monday plunged cryptocurrencies for the first time since January 2021, taking their value below $1 trillion, raising concerns that the route could spread to other assets or affect other companies.

Bitcoin fell as much as 14% on Monday after major US cryptocurrency lending firm Celsius Network halted withdrawals and transfers, citing “extreme” market conditions, in the latest sign of a financial market slowdown in the cryptosphere.

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The move by Celsius on Monday plunged cryptocurrencies for the first time since January 2021, taking their value below $1 trillion, raising concerns that the route could spread to other assets or affect other companies.

“Almost anything can be settled in crypto… because the whole place is over-leveraged,” said Corey Klipston, chief executive officer of bitcoin savings platform Swan Bitcoin. “It’s all a house of cards.”

Celsius CEO Alex Mashinsky and Celsius did not respond to Reuters requests for comment.

New Jersey-based Celsius, which has approximately $11.8 billion in assets, offers interest-bearing products to customers who deposit cryptocurrencies with its platform. It then lends out cryptocurrencies to earn returns.

Following the Celsius announcement, bitcoin hit an 18-month low of $22,725 before a slight rebound to around $23,265. Number 2 token Ether fell 18% to $1,176, its lowest since January 2021.

Companies exposed to cryptocurrencies previously warned that the coin’s price could have ramifications, including triggering margin calls.

“It’s still an uncomfortable moment, and there are some contagious risks around crypto more broadly,” said Joseph Edwards, head of financial strategy at fund management firm Solarize Finance.

The crypto markets have taken a dive in the past few weeks as rising interest rates and rising inflation have prompted investors to abandon riskier assets in the financial markets.

Markets extended a selloff on Monday after US inflation data on Friday showed the biggest price increase since 1981, prompting investors to place their bets on Federal Reserve rate hikes.

This could be a major driver of the cryptocurrency market, Jay Hatfield, chief investment officer at Infrastructure Capital Management, wrote in a note on Monday.

“The overexpansion of its balance sheet by the Fed created many bubbles, including tech stocks, (and) crypto tokens,” he said.

Cryptocurrency investors are also worried about the May collapse of TeraUSD and Luna Token, shortly after Tether, the world’s largest stablecoin, broke its 1:1 peg against the dollar.

In a blog post on Monday, Tether said that while it has invested in Celsius, its lending activity with the crypto platform “has always exceeded” and has had no effect on Tether’s reserves. The token was last trading flat at $1.

Furthermore, on Monday, another crypto lending platform, BlockFi, said that it was laying off about 20% of its staff due to “dramatic changes in macroeconomic conditions”. BlockFi said it had nothing to do with Celsius.

Bitcoin, which surged in 2020 and 2021, is down nearly 50% so far this year. Ethereum is down over 67% this year.

crypto lending

Celsius stated on its website that customers who transfer their crypto to its platform can earn an annual return of up to 18.6%. The website urges customers to “earn more. Borrow less”.

In a blog post on Sunday evening, the company said it has halted withdrawals, as well as transfers between accounts, “to stabilize liquidity and operations while we take steps to preserve and protect assets.” “

“We are taking this action today to better position Celsius to honor its withdrawal obligations, over time, over time,” the company said.

Based on CoinGecko data, the Celsius coin is down about 97% over the past 12 months, down from $7 to around 20 cents.

‘Grey Area’

Crypto lending products have grown in popularity and many companies have launched offerings within the past year.

This has raised concerns among regulators who are concerned about the safety of investors and systemic risks from unregulated lending products.

Matthew Nieman of CMS Law Firm said Celsius and the crypto firm that provides similar services operate in a regulatory “grey area”.

Celsius last year raised $750 million in funding from investors including Cais de Depot et Placement du Québec, Canada’s second largest pension fund. At that time the value of Celsius was $3.25 billion.

As of May 17, Celsius had $11.8 billion in assets, its website said, less than half of what it was in October, and had processed loans totaling $8.2 billion.

In October last year, CEO Mashinsky was quoted as saying that Celsius has assets of more than $25 billion.

Rival crypto lender Nexo said on Monday that it had offered to buy the outstanding assets of Celsius.

“We reached out to Celsius on Sunday morning to discuss the acquisition of its collateralized loan portfolio. So far, Celsius has opted not to engage,” said Nexo co-founder Antoine Trenchev.

Celsius did not respond to a request for comment on Nexo’s proposal.

14 June, 2022, 1:51 pm

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