Celsius, a contentious cryptocurrency lending platform, declared that it was stopping all withdrawals, contributing to the market’s already-stressed state.
As of May, Celsius was one of the key figures in the embryonic crypto lending market, with about $12 billion in assets under management and more than $8 billion in client loans. Customers can get higher-than-average interest rates on their deposits if they join the squad.
“Today, we are notifying you that Celsius is freezing all withdrawals, Swaps, and transfers between accounts due to unusual market conditions,” the firm wrote in a memo to clients on Monday.
Concerns about Celsius’ solvency have been raised due to the move. Since October, when it controlled $26 billion in customer funds, the company’s assets have more than halved in value. In the same interval, the cel token has lost 97 percent of its value. Celsius is the largest holder of the cel, a cryptocurrency that pushes customers to buy to obtain prizes and lower lending rates.
Bitcoin and other cryptocurrencies have taken a loss as a result of the news. According to Coin Metrics figures, the world’s most important digital asset dropped 8% to $25,287, touching lows not seen since December 2020. Ether has lost 8% to $1,329, while Celsius’ cel cryptocurrency has dropped more than 50%.
It comes on the heels of the $60 billion collapse of terraUSD, the much-hyped stablecoin. Regulators’ worries about crypto goods offering investors substantial returns have grown at a rate of destruction. Anchor, a loan firm, once assured members up to 20% interest on their terraUSD holdings, a coin initially supposed to be worth $1.
Celsius may have had exposure to the now-defunct terraUSD stablecoin, as per market participants. Celsius has rejected this claim.
Last week, the firm claimed it had no concerns about completing withdrawal requests. Celsius contended that it had sufficient reserves and “more than enough” ether to meet its obligations.
Celsius CEO Alex Mashinsky said in April that his company keeps on about 300 per cent collateral for each loan it provides to regular investors while it issues under collateralised loans to institutional investors.
He stated then, “We’ve been doing this for five years, longer than anyone else.” “The firm is functioning quite well.”
Mashinsky blasted a crypto investor who voiced issues with Celsius just hours before declaring a withdrawal restriction.
“Do you know somebody who has trouble locating himself from Celsius?” Before accusing the investor of propagating “misinformation,” Mashinsky questioned.
Crypto financing is still very much a grey area following regulation. According to US market regulators, many items should be classified as securities subject to tight procedures to defend investors.