The cryptocurrency market is getting the jitters, following the US$60 billion crash of stablecoin TerraUSD and its sister currency Luna just last month and now, Celsius Network.
Last week, the cryptocurrency lending platform paused all withdrawals and transfers.
In a note to its customers, Celsius said that “due to extreme market conditions”, it was “pausing all withdrawals, Swap and transfers between accounts” and was apparently taking this action to “put Celsius in a better position to honour, over time, its withdrawal obligations.”
On Monday, the cryptocurrency lending firm asked its users for more time to stabilise the company’s liquidity and operations but did not say when the freeze would be lifted, leaving its customers in limbo and many are understandably upset.
Ironically, just before Celsius moved to freeze all transactions on its site, it said it had the reserves to meet obligations.
The company, which CNBC estimated has over US$8 billion lent out to clients and almost US$12 billion in assets as of May, offers interest-bearing products to its customers who deposit cryptocurrencies on its platform.
Celsius then lends out the cryptocurrencies to earn a return.
The company, which was started in 2017, is seen as one of the largest players in the crypto lending space – it’s estimated they service some 1.7 million people around the world, which means millions of dollars in assets are currently locked up.
Reportedly, Celsius Network has since hired restructuring lawyers to advise on possible solutions for its financial problems.
Cryptocurrencies have seen their value rise and fall wildly this year – the two top coins, Bitcoin and Ethereum, have seen their prices slide to their lowest in years.
Another factor playing a role in market instability – rising global inflation and a series of aggressive rate hikes by the US Federal Reserve.
*Featured image from Unsplash/@polarmermaid
By Samantha Chan \ 10:30, 22 June 2022