Cryptocurrency lending platform Celsius said it is halting all withdrawals from accounts amid continued market volatility, a development that is causing panic in the global crypto market.
Over the weekend, more than $200 billion U.S. had been wiped off the entire cryptocurrency market amid news that Celsius is preventing clients from withdrawing their digital assets. The market capitalization of the entire cryptocurrency sector is now below $1 trillion U.S. for the first time since February 2021, according to data from CoinMarketCap.
The price of Bitcoin (BTC) is down 13% and has fallen below $24,000 U.S., hitting its lowest level since December 2020. The price of Ethereum (ETH), the second largest cryptocurrency, is down nearly 20% to $1,200 U.S.
Celsius is one of the largest players in the nascent cryptocurrency lending space, with more than $8 billion U.S. lent out to clients and almost $12 billion U.S. in assets under management as of May this year. The group offers users higher-than-average interest rates on their deposits, promising yields as high as 18%.
“Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, swaps, and transfers between accounts,” the company said in a memo to clients.
The move has raised concerns about Celsius’ solvency. The firm has seen the value of its assets cut in half since last October when it handled $26 billion U.S. in client funds. Celsius’ “Cel” digital token has lost 97% of its value in the same timeframe.
Troubles at Celsius come shortly after the $60 billion U.S. meltdown of stablecoin TerraUSD (UST). That collapse heightened regulators’ fears over cryptocurrency products offering investors unusually high returns.
Just last week, Celsius said it had not had any issues meeting withdrawal requests. Celsius said it had the reserves and “more than enough” of the cryptocurrency Ethereum to meet its obligations.
Cryptocurrency lending is still very much a regulatory gray zone. U.S. market regulators believe many of the products should be treated as securities subject to strict rules to ensure investors are protected.
Celsius, which claims to have 1.7 million customers, advertises to its users that they can get a yield of 18% through the platform. Users deposit their cryptocurrencies with Celsius. That crypto is then loaned out to institutions and other investors. Users get yield on the revenue Celsius earns.
