The cryptocurrency market suffered another day of volatility as the Binance exchange temporarily suspended bitcoin withdrawals and the total value of the digital asset market fell below $ 1 trillion (£ 820 billion) after a cryptocurrency lender stopped customers from withdrawing funds. you are.
The Celsius Network cryptocurrency lending platform has suspended withdrawals due to “extreme market conditions”, leading to a sell-off.
Bitcoin fell to a 17-month low of $ 23,629 after the announcement of Celsius, while ether, the world’s second-largest cryptocurrency after bitcoin, fell more than 15% to $ 1,237, its lowest level since January 2021. Meanwhile, Binance, the stock exchange for cryptocurrency, announced that it had “temporarily stopped” the withdrawal of bitcoins due to a “stuck transaction in the chain”, before announcing a resumption a few hours later.
The total value of the cryptocurrency market fell below $ 1 trillion after the sell-off, according to data site CoinMarketCap, which valued the market at nearly $ 3 trillion in November.
Celsius said in a blog post that it was “pausing” all withdrawals and transfers between accounts for its 1.7 million customers. The company offers customers high interest rates – up to 18% – on their cryptocurrency deposits and pays interest on cryptocurrencies that include its own token called CEL.
“Due to extreme market conditions, today we announce that Celsius is pausing all withdrawals, exchanges and transfers between accounts,” the platform said. “Today, we are taking this action to put Celsius in a better position to comply with its withdrawal obligations over time.”
Binance said in a statement that the withdrawal of bitcoins was stopped shortly after noon in the UK “due to an earlier batch of transactions blocked by low transaction fees.” As a result, there has been a backlog of bitcoin withdrawals, Binance said. BST then announced at 4.30pm that the withdrawals had resumed.
On June 7, Celsius published a blog aimed at reassuring customers amid volatile conditions in cryptocurrency markets, caused initially by the collapse of the crypto project Terra.
Entitled “Damn, torpedoes, full speed ahead”, the blog says the company had “no problems executing download requests”. Celsius has offices in London, New York and Lithuania.
Celsius’ website tells customers they can “borrow like a billionaire.” It has $ 11.8 billion in assets, down from more than $ 24 billion in December last year. In November, he said he had raised $ 750 million from investors, including the Caisse de dépôt et placement du Québec, one of Canada’s largest pension funds.
Like the bank, Celsius also has a retail lending operation, where customers can borrow US dollar-denominated money from the service. However, due to the inability to send debt collectors after a cryptocurrency portfolio, Celsius loans are “oversecured”: customers must deposit bitcoin or etherium worth at least twice the value of the money they borrow. This can be useful if, for example, a bitcoin millionaire needs hard money to buy a house but does not want to liquidate his bitcoin holdings because they are betting, the coin will appreciate again.
However, unlike a bank, Celsius loans charge a lower interest rate than it pays on deposits. The company made up for the difference with an opaque investment strategy that in the past included investing $ 300 million in bitcoin mining, offering more traditional loans to unnamed “institutional investors” at higher interest rates and taking large stakes in other cryptocurrency projects.
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Sometimes this strategy leads to big losses: hacking the decentralized investment platform BadgerDAO, which destroys this project, has been revealed to cost Celsius $ 50 million in bitcoins.
The company also had a close relationship with Terra’s non-existent stable coin project, at one point investing $ 500 million in Anchor Protocol, Terra’s own savings and lending service. Celsius is also offering customers higher returns if they accept their interest payments in the project’s own crypto token, CEL, which traded at $ 7 last year and fell to less than $ 0.20.
Cryptocurrencies have also been gripped by market panic over rising inflation and higher interest rates, which has dulled appetite for riskier assets.
“As inflation proves to be an even more difficult opponent to win than expected, bitcoin and ether continue to suffer serious setbacks,” said Susanna Streetter, senior investment and market analyst at Hargreaves Lansdown.
“They are the main victims of the flight away from risky assets, as investors are worried about spiraling consumer prices around the world.
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