June 30, 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 of a financial market slump hitting the cryptocurrency space.

Celsius’ move caused a slide across the cryptocurrency, as its value fell below $1 trillion on Monday for the first time since January 2021, leading to a 12% drop in the largest bitcoin token.

After Celsius’ announcement, bitcoin touched an 18-month low at $23,300. Token Ether No. 2 fell 18% to $1,176, its lowest level since January 2021.

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Cryptocurrency markets have fallen in the past few weeks as rising interest rates and rising inflation have prompted investors to dump riskier assets in the financial markets.

Markets extended a sell-off on Monday after Friday’s US inflation data, which showed the largest increase in prices since 1981, prompted investors to raise their bets on a Fed rate hike. Read more

Cryptocurrencies were also shaken by the collapse of terraUSD and Luna in May. Read more

Bitcoin, which jumped in 2020 and 2021, is down about 50% so far this year.

“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.

Lending CRYPTO

Celsius offers useful products to customers who deposit cryptocurrencies on its platform. Then he lends cryptocurrency to earn a return.

Celsius said on its website Monday that customers who migrate their cryptocurrency to its platform can earn an annual return of up to 18.6%.

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The site urges customers to “earn high, borrow low.”

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.

Celsius’ token, on which cryptocurrency borrowers and lenders can receive or pay interest, has fallen about 97% in the past 12 months, from $7 to about 20 cents, based on CoinGecko data.

Celsius CEO Alex Mashinsky and Celsius did not immediately respond to Reuters requests for comment.

gray area

Growing interest in cryptocurrency lending has led to concerns from regulators, especially in the United States, who are concerned about investor protection and systemic risks from unregulated lending products. Read more

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 raised $750 million in financing last year 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.

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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

Our criteria: Thomson Reuters Trust Principles.