Investors Panic as Celsius Crypto Freezes Crypto Withdrawals
Celsius Network Ltd, one of the major crypto lenders and main players in the world of decentralised finance, confirmed late Sunday that it was halting withdrawals, swaps, and transfers after weeks of speculation about its ability to make good on the increasingly large returns it offered on certain of its products, including yields as high as 17%.
Crypto loan solutions have grown in popularity, with numerous firms launching offerings in the past year. Celsius raised $750 million in the capital last year from investors including Caisse de Dépôt et Placement du Québec, Canada's second-largest pension fund. Celsius was priced at $3.25 billion at the time. Celsius has $11.8 billion in assets as of May 17, a drop of more than half from October.
The decision to stop withdrawals effectively halted a platform with registered entities all over the world and billions of dollars in digital coins under management, ramping up a selloff in the broader market that was already underway due to concerns about the possibilities of tightening monetary policy ahead of a Federal Reserve meeting this week.
While Celsius crypto is a centralised platform with operations and staff that distinguishes it from DeFi, its deep involvement in the space, including investment in Terra and various risky strategies devised to earn high yields that it can then pass on to its users, has raised concerns about its viability.
Celsius crypto is a key player in the market for digital yield products, letting users lend out their tokens as collateral for other crypto initiatives. Traders were able to earn yearly rates of up to 17% in exchange for lending their tokens.
Celsius's crypto withdrawal ban early Monday was a U-turn after the company had spent many days denying claims that consumers couldn't make withdrawals. At the weekend, CEO Alex Mashinsky challenged sceptics to find "even one individual who has an issue withdrawing. Celsius crypto stated that the redemption freeze was implemented for the benefit of our entire community to control liquidity and operations while we take steps to preserve and safeguard assets.
The Celsius crypto move spurred a collapse across cryptocurrencies, with their value falling below $1 trillion on Monday for the first time since January 2021, raising concerns that the meltdown might spread to other assets or firms.
Following Celsius's crypto statement, bitcoin fell to an 18-month low of $22,725 before modestly rebounding to about $23,265. The second-largest cryptocurrency in terms of market capitalisation Ethereum fell as much as 18% to $1,176, its lowest since January 2021. Companies with a stake in cryptocurrencies have previously warned that drops in token values might have repercussions, such as triggering margin calls.
Markets continued to fall on Monday following the release of U.S. inflation figures on Friday, which revealed the highest price increase since 1981, prompting investors to bolster their bets on Federal Reserve rate hikes. According to research, Celsius’s crypto token has dropped 97 per cent in the last year, from $7 to about 20 cents.
Author: Emmanuel Baiden
7 years experience within the financial services sector most notably in Sales, Trading, research and writing articles within the crypto space. I have a bachelor's degree in International Business and a Master's in Investment and Risk Finance . I am also an associate member of the Chartered Institute for Securities and Investment.