By Tom Wilson, Hannah Lang and Elizabeth Howcroft
Crypto contagion fears spread after Celsius Network freezes withdrawals
WASHINGTON听–听Bitcoin fell as much as 14% on Monday听补蹿迟别谤听major US听肠谤测辫迟辞currency lending company听颁别濒蝉颈耻蝉听狈别迟飞辞谤办听froze听飞颈迟丑诲谤补飞补濒蝉听and transfers citing “extreme” market conditions, in the latest sign of the financial market downturn hitting the听肠谤测辫迟辞sphere.
The听颁别濒蝉颈耻蝉听move triggered a slide across听肠谤测辫迟辞currencies, with their value dropping below $1 trillion on Monday for the first time since January 2021, sparking worries the rout might spill over into other assets or hit other companies.
“Almost anything can be systemic in听肠谤测辫迟辞聽… because the whole space is over-levered,” said Cory Klippsten, chief executive of Swan Bitcoin, a bitcoin savings platform. “It’s all a house of cards.”
颁别濒蝉颈耻蝉听CEO Alex Mashinsky and听颁别濒蝉颈耻蝉听did not respond to Reuters requests for comment.
New Jersey-based听颁别濒蝉颈耻蝉, which has around $11.8 billion in assets, offers interest-bearing products to customers who deposit听肠谤测辫迟辞currencies with its platform. It then lends out听肠谤测辫迟辞currencies to earn a return.聽
础蹿迟别谤听Celsius‘s announcement, bitcoin <叠罢颁=叠罢厂笔&驳迟;听touched an 18-month low of $22,725, before rebounding slightly to around $23,265.听No.2 token ether聽ETH=BTSP聽dropped as much as 18% to $1,176, its lowest since January 2021.
Companies exposed to听肠谤测辫迟辞currencies have previously warned that declines in token prices could have ripple effects, including by triggering margin calls.
“It’s still an uncomfortable moment, and there’s some听肠辞苍迟补驳颈辞苍听risk around听肠谤测辫迟辞聽more broadly,” said Joseph Edwards, head of financial strategy at fund management firm Solrise Finance.
颁谤测辫迟辞听markets have dived in the past few weeks as rising interest rates and surging inflation prompted investors to ditch riskier assets across financial markets.
Markets extended a聽蝉别濒濒-辞蹿蹿听on Monday听补蹿迟别谤听US inflation data on Friday, which showed the largest price increase since 1981, prompting investors to raise their bets on Federal Reserve rate hikes.
That was likely the key driver of the听肠谤测辫迟辞聽market nosedive, Jay Hatfield, chief investment officer at Infrastructure Capital Management, wrote in a note on Monday.
“The Fed鈥檚 overexpansion of its balance sheet led to a number of bubbles including tech stocks, (and)听肠谤测辫迟辞聽tokens,” he said.
Cryptocurrency investors have also been rattled by the collapse of the terraUSD and luna tokens in May which was shortly followed by Tether, the world’s largest stablecoin, briefly breaking its 1:1 peg with the dollar.聽
In a聽聽on Monday, Tether said that while it has invested in听颁别濒蝉颈耻蝉, its lending activity with the听肠谤测辫迟辞聽platform has “always been overcollateralized” and has no impact on Tether’s reserves. The token was last trading flat at $1.
Also on Monday, BlockFi, another听肠谤测辫迟辞聽lending platform, said it was reducing its staff by about 20% due to “dramatic shift in macroeconomic conditions.” BlockFi said that it has no exposure to听颁别濒蝉颈耻蝉.
Bitcoin, which surged in 2020 and 2021, is down around 50% so far this year. Ethereum is down more than 67% this year.
颁搁驰笔罢翱听LENDING
颁别濒蝉颈耻蝉听says on its website that customers who transfer their听肠谤测辫迟辞聽to its platform can earn an annual return of up to 18.6%. The website urges customers to “Earn high. Borrow low”.
In a聽聽on Sunday evening, the company said it had frozen听飞颈迟丑诲谤补飞补濒蝉, as well as 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听颁别濒蝉颈耻蝉听in a better position to honor, over time, its withdrawal obligations,” the company said.
Celsius‘s token has fallen about 97% in the last 12 months, from $7 to around 20 cents, based on CoinGecko data.
‘GREY AREA’
颁谤测辫迟辞听lending products have surged in popularity and many companies have launched offerings within the last year.
That has sparked concerns among regulators who are worried about investor protections and systemic risks from unregulated lending products.聽
颁别濒蝉颈耻蝉听and听肠谤测辫迟辞聽firms that offer similar services operate in a regulatory “grey area,” said Matthew Nyman at CMS law firm.
颁别濒蝉颈耻蝉听raised $750 million in funding last year from investors including Canada’s second-largest pension fund Caisse de D茅p么t et Placement du Qu茅bec.听颁别濒蝉颈耻蝉听was valued at the time at $3.25 billion.
As of May 17,听颁别濒蝉颈耻蝉听had $11.8 billion in assets, its website said, down by more than half from October, and had processed a total of $8.2 billion worth of loans.
Mashinsky, the CEO, was quoted in October last year saying听颁别濒蝉颈耻蝉听had more than $25 billion in assets.
Rival听肠谤测辫迟辞聽lender Nexo said on Monday it had offered to buy听颁别濒蝉颈耻蝉‘ outstanding assets.
“We reached out to听颁别濒蝉颈耻蝉听Sunday morning to discuss the acquisition of its collateralised loan portfolio. So far,听颁别濒蝉颈耻蝉听has chosen not to engage,” said Nexo co-founder Antoni Trenchev.
颁别濒蝉颈耻蝉听did not respond to a request for comment on Nexo’s offer. – Reuters
