Celsius: crypto lender sparks manic meltdown

Celsius: ‘extreme market conditions’

(Image credit: Dennis Diatel/Alamy Stock Photo)

Cryptocurrencies have become “emblematic” of the “flight from speculative assets”, as monetary policy has tightened around the world to fight inflation, said Bloomberg. This week delivered another “white-knuckle ride”. The latest trigger for big falls was “crypto lender” Celsius, which sparked panic on Monday when it froze withdrawals, citing “extreme market conditions”. In the ensuing turmoil, the values of all major coins were hit. Bitcoin dropped by 15% to $23,629; ether fell 17%; the ferocious sell-off prompted the world’s largest crypto exchange, Binance, to temporarily suspend bitcoin withdrawals. The value of the total crypto market is now below $1trn, according to CoinMarketCap – from almost $3trn in November.

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Celsius, which bragged that its 1.7 million customers could “borrow like a billionaire”, had “seemed to offer the best of all worlds to crypto enthusiasts”, said Lex in the FT. Advertising “an annual percentage yield of 18.63%” on crypto deposits, it paid interest in crypto assets but also let customers borrow US dollars. The lender, which had estimated assets of $12bn in May, may now be insolvent, said Tim Hakki on Decrypt. So what happened? “The short answer: nobody really knows.” But the big worry is contagion. Unlike crypto’s last big blow-out – the collapse of TerraUSD in May – Celsius was intricately connected with many other crypto “ecosystems”.

The fear now, said Martin Peers on The Information, is “a self-perpetuating spiral, as investors liquidate their positions” to conserve capital. Most at risk are “real world” firms that have borrowed against their crypto holdings – such as MicroStrategy, a software business that has invested $4bn in bitcoin. This punishing bust may have much further to run.