June 28, 2022

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Bitcoin slips after crypto lender Celsius Network freezes withdrawals

Bitcoin slips after crypto lender Celsius Network freezes withdrawals

LONDON (Reuters) – Bitcoin tumbled on Monday after major US crypto lender Celsius Network froze withdrawals and transfers, citing “extreme” conditions, in the latest sign that financial market turmoil is causing distress in the cryptocurrency world.

Celsius’ move caused a slide across cryptocurrencies, as their value fell below $1 trillion on Monday for the first time since January last year, leading to an 11% drop in the largest bitcoin token.

After Celsius’ announcement, bitcoin touched an 18-month low of $23,476. Token Ether No. 2 fell as much as 16% to $1,177, its lowest level since January 2021.

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“This remains an uncomfortable moment, and there are some contagion risks around cryptocurrencies more broadly,” said Joseph Edwards, head of financial strategy at fund manager Solrise Finance.

Celsius offers interest bearing products to customers who deposit cryptocurrency into its platform, and then lend cryptocurrency to earn a return.

The company said in a blog post that it has frozen withdrawals and transfers between accounts “to stabilize liquidity and operations while we take steps to preserve and protect assets.”

“We are taking this action today to put Celsius in a better position to meet its withdrawal obligations over time,” the New Jersey-based company said.

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Firms that offer percentage degrees and cryptocurrency firms that provide similar services to banks are in a “gray area” of the regulations, said Matthew Neiman of law firm CMS. “They are not subject to any clear regulation that requires disclosure” of their assets.

Celsius CEO Alex Mashinsky and Celsius did not immediately respond to Reuters requests for comment outside of US business hours.

Celsius raised $750 million in financing in late November from investors, including Canada’s second largest pension fund, Caisse de Dépôt et Placement du Québec. The percentage score at the time was estimated at $3.25 billion.

As of May 17, Celsius had $11.8 billion in assets, its website said, down more than half from October, and had processed $8.2 billion in loans.

Mashinsky, the CEO, was quoted in October last year as saying that Celsius had more than $25 billion in assets.

The company’s website, which urges customers to “earn high returns. Low borrow,” said it was offering interest rates of up to 18.6%.

Rival crypto lender Nexo said Monday it has offered to buy Celsius’ existing assets.

“We reached out to Celsius on Sunday morning to discuss the acquisition of its secured loan portfolio. So far, Celsius has chosen not to participate,” said Anthony Trenchev, co-founder of Nexo.

Celsius did not immediately respond to a request for comment on the Nexo show.

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Additional reporting by Tom Wilson and Elizabeth Hawcroft in London. Additional reporting by Abinaya Vijayaraghavan in Bengaluru and Alun John in Hong Kong; Editing by Bradley Perrett and Jane Merriman

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