Crypto Drops Below T As Credit Giant Freezes Withdrawals
Crypto markets were: shocked when the not-so-stable coin UST and sister cryptocurrency LUNA collapsed last month, bringing the digital asset economy down with them and exposing smaller, more vulnerable players.
Now we’re seeing crypto whales like Celsius float to the surface for a variety of reasons, pushing global crypto market capitalization below $1 trillion for the first time since January 2021.
Late last night, Celsius, one of the largest centralized cryptocurrency lenders, announced that it was pausing all withdrawals, swaps and transfers for users. The company tried to justify its actions by stating in a press release that it is “acting in the best interests” of its community of approximately 2 million people and “putting Celsius in a better position to meet its withdrawal obligations over time”.
Celsius owned more than 151,000 bitcoin and had approximately $12 billion in assets under management as of May 17. The company even boasted in April that it owns more bitcoin than public companies such as MicroStrategy, Tesla, Galaxy Digital, Square and Coinbase.
In the past, the company has made headlines for raising one of its biggest funding rounds in 2021, an oversubscribed $750 million, while simultaneously suspending (and later firing) its former chief financial officer, Yaron Shalem, on outside fraud and sexual assault charges. in November of last year.
“You think there’s arbitrage, but what they’ve really done is sell volatility.” Cory Klippsten, CEO of Swan Bitcoin
The two largest cryptocurrencies by market cap, bitcoin and ether, are down about 15% and 17% respectively in the past 24 hours as the market sell-off continues and the Celsius situation exacerbates already bearish market sentiments.
What caused the Celsius freeze?
There is no definitive answer at this time, but many market participants indicated that Celsius could be a riskier company than many initially thought it was, with some pointing to a lack of confidence in its business. That sentiment resulted in a bank run scenario similar to what we saw with UST and LUNA last month: investors didn’t want their cryptocurrency to stay on the platform and, pending a freeze or crisis, they wanted out. first.
“People were collecting their coins from Celsius and they didn’t have enough [liquidity] to fulfill redemption requests,” Swan Bitcoin CEO Cory Klippsten told Marketingwithanoy. “Had they fulfilled all of their user redemption requests, they would be completely insolvent.”
Celsius CEO Alex Mashinsky did not respond to requests for comment from Marketingwithanoy on Monday.