Bitcoin BTC USD plunged to as low as $20,834 late Monday, the lowest level since December 2020 and down about 70% from its all-time high in November. The No.1 cryptocurrency is trading at around $22,407 Tuesday, down 5% over the past 24 hours, according to CoinDesk data.
The leading crypto has been trading in a relatively tight range for weeks as crypto and stock markets have struggled to regain any notable upward momentum following a broader sell-off in May. Experts also point to the continuous war in Ukraine and concerns over tighter monetary policy by the Fed for why we’re seeing slumping prices in the stock and crypto markets.
The crypto market has been increasingly tracking the stock market lately, which makes it even more intertwined with macroeconomic factors, experts say. Ethereum has followed a similar pattern.
"Acting in the interest of our community is our top priority," Celsius said in the memo. "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."
Celsius was not immediately available for additional comment on the situation when contacted by CNBC. It comes hot on the heels of the $60 billion meltdown of hyped stablecoin terraUSD. The collapse heightened regulators' fears over crypto products offering investors unusually high returns. Anchor, a lending service, once promised users interest rates of up to 20% on their holdings of terraUSD, a coin that was always meant to be worth $1.
Market participants have suggested that Celsius had exposure to the now-collapsed terraUSD stablecoin. Celsius has denied this.
Just last week, the company said it had not had any issues meeting withdrawal requests. Celsius said it had the reserves and "more than enough" of the cryptocurrency ether, to meet obligations.
In April, Celsius boss Alex Mashinsky told CNBC his company holds on average 300% collateral for each loan it offers to retail investors, while for institutional investors it issues undercollateralized loans.
"We've been doing this for five years now, longer than anybody else," he said at the time. "The business is doing very well."
Hours before announcing a freeze on account withdrawals, Mashinsky lashed out at a crypto investor raising concerns with Celsius.
"Do you know even one person who has a problem withdrawing from Celsius?" Mashinsky asked, before accusing the investor of spreading "misinformation."
Crypto lending is still very much a regulatory gray area. U.S. market regulators believe many of the products should be treated as securities subject to strict rules to ensure investors are protected.
In February, BlockFi, a competitor to Celsius, was hit with a $100 million penalty from the Securities and Exchange Commission and 32 states, which charged it with violating securities laws. Celsius itself was sent cease-and-desist letters from four U.S. states.
Vijay Ayyar, head of international at crypto exchange Luno, said Celsius' decision to pause withdrawals had exacerbated the sell-off in cryptocurrencies, which have already come under pressure due to concerns around rising inflation and higher interest rates.
"The Luna/Terra debacle potentially has a lot of hidden skeletons in the closet, which we're now potentially seeing come out," Ayyar told CNBC.
"The trust in these yield products is definitely impacted and we're probably going to see widespread regulation on such products in the near term."
Nexo, another crypto lending firm, said it sent Celsius a letter Sunday offering to acquire its collateralized loan portfolio, but the company declined.
"As a sign of goodwill and in an attempt to support the digital asset ecosystem in these difficult times, yesterday we reached out to the Celsius team to offer our support, but our help was refused" Antoni Trenchev, Nexo's CEO, told CNBC.
Tether lending activity with Celsius (as with any other borrower) has always been overcollateralized and has no impact on our reserves," the company said in a statement Monday.
The manager of Canada's second-largest pension fund, the Caisse de dépôt et placement du Québec, and Westcap, a growth-stage investor with over $8 billion in assets under management, have also made investments in Celsius.
CDPQ said it is "closely monitoring the situation." "Celsius has been impacted by very difficult markets in recent weeks, more specifically, the strong volume of withdrawals by customers," a CDPQ spokesperson told CNBC. "Celsius is taking proactive action to uphold its obligations to its customers (Celsius community) and has honoured its obligation to its customers to date."
Every cryptocurrency get down.
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