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Celsius redemption restrictions cause Bitcoin plunge

As the pressure on the digital asset market grows, the Binance exchange suspended bitcoin withdrawals for many hours.

Binance suspended bitcoin withdrawals for many hours on Monday, following crypto lender Celsius’s decision to block users from withdrawing funds from its platform, claiming “extreme market conditions” as digital assets fell in value.

Bitcoin, ether, and other key tokens have been swaying recently as inflation has risen, and major central banks have warned they will reduce stimulus drastically. 

According to Bloomberg data, the price of bitcoin plummeted as high as 10.3% on Tuesday to an 18-month low of $20,823.56.

The reduction came after a steep drop the day before, owing to evidence of strain in the digital asset market’s infrastructure. The ban was due to a “stuck transaction,” according to Binance.

According to CryptoCompare data, Bitcoin, the world’s most commonly traded cryptocurrency, has lost about 20% since Friday to below $24,000, its biggest drop since December 2020. 

Nonetheless, the absolute value of the cryptocurrency market has dropped from a high of $3.2 trillion in November to around $1 trillion on Monday.

Celsius is one of the most well-known companies in the digital yield market, allowing users to lend out their tokens as security for other crypto projects. 

Traders could earn up to 17% annual rates in exchange for lending their tokens.

Bitcoin Falls to Lowest Level Since 2020

Bitcoin Falls to Lowest Level Since 2020

After the terra and luna tokens, which formed the cornerstone of another famous yield platform, failed in a couple of days last month, sentiment towards these high-risk ventures cooled drastically. 

From more than $24 billion in late December, the value of assets stored on Celsius’s platform had shrunk to less than $12 billion as of May 17.

Ether has plummeted about 30% since Friday, dropping two-thirds in dollar terms this year to trade at $1,195. Ether is used as a gauge of mood for digital asset projects that provide significant payouts to investors.

On Monday, the selling ricocheted into the stocks of crypto-focused businesses. MicroStrategy, a technology firm that invests significantly in bitcoin, lost a quarter of its value in early Wall Street trade, while Coinbase, a Nasdaq-listed crypto exchange, dropped 16%.

Last year, Caisse de dépôt et placement du Québec, Canada’s second-largest pension fund, and WestCap, founded by former Airbnb and Blackstone executive Laurence Tosi, raised $400 million in an equity investment round.

CDPQ stated it was “closely watching the situation.”

“Investors are lowering their risk in all asset classes in a climate of widespread market falls (stock markets and bonds — for the first time in 50 years),” it stated.

“In this context, Celsius has been hurt by extremely challenging markets in recent weeks, particularly the high frequency of customer withdrawals.

Celsius is taking aggressive steps to meet its duties to its consumers (the Celsius community) and has done so too far.”

A request for comment on WestCap’s investment was not immediately returned. 

The fundraising took place hot on the heels of the US officials’ statement that they were looking into the industry. 

Celsius’s yield-bearing accounts are alleged to be an unregistered securities offering by state authorities in Texas and New Jersey.

Celsius’s decision to cease withdrawals early on Monday was likewise a U-turn after the company had spent several days denying that clients could not make withdrawals. 

Alex Mashinsky, the company’s chief executive, challenged detractors over the weekend to find “even one person who has difficulty withdrawing.”

“The redemption freeze was implemented for the “interest of our whole community to stabilize liquidity and operations while we take efforts to maintain and protect assets.”

This was the response from Celsius, which has offices in the United States, the United Kingdom, and Lithuania.

According to CryptoCompare data, the group’s coin, CEL, has lost half its value in the last 24 hours.


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  • Phyllis Wangui

    Phyllis Wangui is a Financial Analyst and News Editor with qualifications in accounting and economics. She has over 20 years of banking and accounting experience, during which she has gained extensive knowledge of the forex, stock news, stock market, forex analysis, cryptos and foreign exchange industries. Phyllis is an avid commentator on these topics and loves to share her insights with others through financial publications and social media platforms.

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