The cryptocurrency market has 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 million ($ 820 billion). pounds sterling), after a cryptocurrency lender prevented customers from recovering their funds.
Celsius Network cryptocurrency lending platform halted withdrawals due to “extreme market conditions”, prompting a sale.
Bitcoin fell to a 17-month low of $ 23,629 after the Celsius announcement, while ether, the world’s second-largest cryptocurrency after bitcoin, fell more than 15% to $ 1,237. its minimum since January 2021. Meanwhile, Binance, the cryptocurrency exchange, announced that it had “temporarily stopped” bitcoin withdrawals due to a “transaction stuck in the chain”, before announcing a resumption of several hours later.
The total value of the cryptocurrency market fell below $ 1 trillion after the sale, according to data site CoinMarketCap, which had 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 of its 1.7 million customers. The company offers customers high interest rates (up to 18%) on their cryptocurrency deposits and pays interest on the cryptocurrency assets, which includes its own token, called CEL.
“Due to extreme market conditions, today we announce that Celsius is stopping all withdrawals, exchanges and transfers between accounts,” the platform said. “We are taking this action today to put Celsius in a better position to meet, over time, its withdrawal obligations.”
Binance said in a statement that bitcoin withdrawals had been suspended shortly after noon in the UK “due to a previous batch of transactions that had been blocked by the low transaction fees sent”. As a result, there had been a delay in withdrawals from the bitcoin network, Binance said. He then announced at 4.30pm BST that the withdrawals had resumed.
On June 7, Celsius published a blog that sought to reassure customers amid volatile cryptocurrency market conditions, initially triggered by the collapse of the Terra crypto project.
Titled “Damn torpedoes, at full speed,” the blog said the company had had “no problem meeting withdrawal requests.” Celsius has offices in London, New York and Lithuania.
The 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.
As a bank, Celsius also has a retail lending operation, with customers able to borrow money, denominated in US dollars, from the service. However, due to the impossibility of sending debt collectors after a cryptocurrency portfolio, Celsius loans are “over-collateralized”: customers must deposit bitcoin or ethereum worth at least twice the value of the money they are asking for. on loan. This can be useful if, for example, a bitcoin millionaire needs some hard cash to buy a home, but does not want to liquidate his bitcoin properties because he is gambling, the currency will go up again.
However, unlike a bank, Celsius loans charge a lower interest rate than it pays on deposits. The company makes up for the difference with an opaque investment strategy that in the past has included investing $ 300 million in bitcoin mining, offering more traditional loans to unnamed “institutional investors” at higher interest rates and taking large participations in other cryptocurrency projects.
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From time to time, this strategy has resulted in huge losses: it was revealed that a hacking of the decentralized investment platform BadgerDAO that eliminated this project had cost Celsius $ 50 million in bitcoins.
The company also had a close relationship with the defunct Terra stablecoin project, and at one point invested $ 500 million in funds in the Anchor Protocol, Terra’s own savings and loan service. Celsius also offers customers higher returns if they accept their interest payments on the project’s own cryptocurrency token, CEL, which was quoted at $ 7 last year and has dropped to less than $ 0.20.
Cryptocurrencies have also been shaken by market panic over rising inflation and higher interest rates, which has dampened the appetite for riskier assets.
“As inflation proves to be an even more difficult opponent to beat than expected, bitcoin and ether continue to have a severe contusion in the ring,” said Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown investment platform.
“They are the main victims of the flight of risky assets, as investors are concerned about the spiral of consumer prices around the world.”