LONDON, June 13 (Reuters) – Bitcoin plummeted on Monday after major US cryptocurrency lending firm Celsius Network froze withdrawals and remittances citing “extreme” conditions, in the latest sign the financial market downturn is hitting the cryptosphere.
The Celsius move sparked a fall in cryptocurrencies, which fell below $1 trillion on Monday for the first time since January 2021, dragged down by a 12 percent drop in the largest token, Bitcoin.
Bitcoin hit an 18-month low of $23,300 after Celsius announcement. Token Ether #2 fell as much as 18% to $1,176, its lowest since January 2021.
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Crypto markets have plummeted over the past few weeks as rising interest rates and rising inflation prompted investors to dump riskier assets in the financial markets.
Markets continued a sell-off on Monday after US inflation data on Friday showed the biggest rise in prices since 1981, prompting investors to increase bets on a Federal Reserve rate hike. Continue reading
Cryptocurrencies were also rocked by the collapse of the terraUSD and Luna tokens in May. Continue reading
Bitcoin, which surged in 2020 and 2021, is down around 50% so far this year.
“It’s still an awkward moment and there’s some risk of contagion around crypto more broadly,” said Joseph Edwards, head of financial strategy at fund management company Solrise Finance.
CRYPTO RENTAL
Celsius offers interest-bearing products to customers who deposit cryptocurrencies on its platform. It then lends out cryptocurrencies to earn a return.
Celsius said on its website Monday that customers who transfer their crypto to its platform can see annual returns of up to 18.6%.
The site encourages customers to “earn big. to borrow low”.
In a blog post, the company said it had frozen withdrawals and inter-account transfers “to stabilize liquidity and operations while we take steps to preserve and protect assets.”
“We are taking this action today to better position Celsius to meet its take-back obligations over time,” the New Jersey-based company said.
Celsius’s token, which crypto borrowers and lenders have used to earn or earn interest on its platform, has fallen about 97% over 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 ZONE’
Rising interest in crypto lending has raised concerns from regulators, particularly in the United States, over investor protection and systemic risk from unregulated lending products. Continue reading
Celsius and crypto firms offering similar services to banks are in a “grey area” of regulations, said Matthew Nyman of law firm CMS. “They are not subject to any clear regulation requiring disclosure” of their assets.
Celsius raised $750 million in funding last year from investors including Canada’s second-largest pension fund, Caisse de Dépôt et Placement du Québec. Celsius was valued at $3.25 billion at the time.
As of May 17, Celsius had $11.8 billion in assets, down more than half from October, according to its website, and had processed a total of $8.2 billion in loans.
Mashinsky, the CEO, was quoted as saying last October that Celsius had more than $25 billion in assets.
Rival crypto lender Nexo said Monday it had offered to buy Celsius’ outstanding 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 get involved,” said Antoni Trenchev, co-founder of Nexo.
Celsius did not immediately respond to a request for comment on Nexo’s offer.
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Reporting by Tom Wilson and Elizabeth Howcroft in London; additional reporting from Abinaya Vijayaraghavan in Bengaluru and Alun John in Hong Kong; Edited by Bradley Perrett and Jane Merriman
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