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Crypto in freefall as lender halt withdrawals

Ollie Smith  |  14 Jun 2022Text size  Decrease  Increase  |  
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Cryptocurrency trading platform Celsius suspended withdrawals on Monday, fuelling a broader crypto price crash around the world. Major exchange Binance has also suspended Bitcoin withdrawals, citing technical problems.

In a blog post marked “a memo to the Celsius community” posted this morning, Celsius said it had suspended trading on its platform due to market volatility. 

“Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, swap, and transfers between accounts. We are taking this action today to put Celsius in a better position to honour, over time, its withdrawal obligations,” said the lender, which claimed to have nearly US$12 billion in assets as recently as May. 

“Acting in the interest of our community is our top priority. In service of that commitment and to adhere to our risk management framework, we have activated a clause in our Terms of Use that will allow for this process to take place. Celsius has valuable assets and we are working diligently to meet our obligations.

“We are taking this necessary action for the benefit of our entire community in order to stabilise liquidity and operations while we take steps to preserve and protect assets. Furthermore, customers will continue to accrue rewards during the pause in line with our commitment to our customers.”

The move comes weeks after the implosion of stablecoin Terra sent shockwaves through digital asset markets. Bitcoin prices plummeted by roughly a quarter in mid-May after the Terra stablecoin was unable to maintain its parity with the US dollar.

Selling accelerated again from 9 June as investors dumped riskier assets amid fears of further interest rate hikes from the US Federal Reserve. Bitcoin broke below the $42,000 at the end of last week. At 5pm AEST today, it had fallen to $32,802, a decline of around 23%. Bitcoin is down 50% this year.

Other coins have been affected by the negative sentiment too. On 9 June Ether was trading at around $2,500, but is now $1,750.

Danni Hewson, financial analyst at AJ Bell, observes upsetting scenes within the cryptocurrency internet community.

“When you read that suicide hotline numbers have been pinned to the sub-Reddit for Terra after users took to the forum to share their heart-breaking stories you can’t help but be moved,” she says.

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“Terra’s fall has had a knock-on to other cryptocurrencies, including Bitcoin, which is down to 16-month lows. There’s plenty of talk about increasing regulation of the space, but for those who’ve lost what they couldn’t afford to lose it comes too late. Market volatility is expected to remain for the foreseeable future and it’s hard not to make knee jerk moves but history teaches that up follows down and sometimes the right move is not to move.”

is editor of Morningstar UK.

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