Bitcoin tanks as crypto lender Celsius freezes withdrawals and markets tumble

World's largest cryptocurrency plunged to the lowest in about 18 months as the impact of Friday’s shock US inflation data continued to reverberate through global risk assets

The world's biggest virtual currency Bitcoin continued to slide after Celsius's announcement, dropping more than 7.8 per cent to $24,502, its lowest since December 2020. Reuters
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Major US cryptocurrency lending company Celsius Network on Monday froze withdrawals because of "extreme market conditions", in the latest sign of pressure on the sector from tumbling crypto markets.

Celsius Network, a significant player in crypto lending, offers interest-bearing products to customers who deposit their cryptocurrencies with the company, and lends out crypto currencies to earn a return.

It raised $750 million in funding late in November from investors, including Canada's second-largest pension fund. The company was valued at the time at $3.25 billion.

In a blog post, the company said it had frozen withdrawals, as well as transfers between accounts, "to stabilise liquidity and operations while we take steps to preserve and protect assets".

"We are taking this action today to put Celsius in a better position to honour, over time, its withdrawal obligations."

The Celsius move puts the spotlight on the sustainability of crypto lending firms after a period of breakneck growth last year fuelled by low interest rates and booming crypto markets.

The surge of interest in crypto lending led to concerns from regulators, especially in the US, who are worried about investor protections and systemic risks.

Crypto markets have come under pressure alongside stocks and other assets in financial markets amid rising interest rates and surging inflation. The collapse in May of the so-called stablecoin terraUSD and its sister token luna has also shaken the crypto industry.

The largest cryptocurrency, Bitcoin, fell further after Celsius's announcement, dropping more than 7.8 per cent to $24,502, its lowest since December 2020.

Ether, the second largest token, dropped as much as 12 per cent to $1,245, its lowest since March 2021.

Major investors and venture capital firms bet heavily last year on the crypto lending sector.

As of May 17, Celsius Network had $11.8bn in assets, its website said, down by more than half from October, and had processed a total of $8.2bn worth of loans.

Chief executive Alex Mashinsky was quoted in October last year saying Celsius had more than $25bn in assets.

Mr Mashinsky did not immediately respond to a text message seeking comment outside US business hours.

In a tweet on Monday, rival crypto lender Nexo said it had offered unspecified help to Celsius, but was refused. It said it was "putting together an offer" for any assets.

The company's website on Monday was offering interest rates of up to 18.6 per cent.

Updated: June 13, 2022, 11:01 AM
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