Amid a deepening sell-off in cryptocurrencies, two popular platforms blocked investors from buying and selling the digital assets.

Crypto-lending company Celsius late Sunday said it was halting users from making withdrawals, trades and transfers between accounts “due to extreme market conditions.” The company, one of the bigger cryptocurrency lending platforms with roughly 1.7 million customers and more than $11 billion in customer assets, didn’t immediately respond to a request for comment Monday.

Hours after the Celsius announcement, Binance became the second platform to pause transactions. CEO Changpeng Zhao tweeted Monday there would be a 30-minute pause on bitcoin withdrawals “due to a stuck transaction causing a backlog.” That halt was extended, but trading later resumed on Monday.

The trading suspensions come amid a $1 trillion loss in cryptocurrencies in the last two months alone, according to Reuters. Some investors are shying away from risky investments in favor of more stable assets amid deepening economic worries and as the economy grapples with the highest inflation in 40 years

Bank run

The shutdown at Celsius sparked anger and frustration on social media, with the company giving no indication in its announcement when it would allow users to access their funds.

“This is not okay. You’re losing trust with your patrons and NOT ACTING IN THE BEST INTEREST OF YOUR COMMUNITY!” one person wrote to Celsius in response to their trading halt announcement.

The total of market value of cryptocurrencies plunged below $1 trillion on Monday to $983 billion, the first time it has dropped below that mark since January 2021, according to CoinMarketCap.

The situation prompted some social media users to compare Celsius to Robinhood, the trading platform that restricted customers from transactions in so-called meme stocks in early 2021 amid wild swings in their prices. That decision prompted congressional hearings and scrutiny from regulators.

It’s unclear whether Celsius depositors will get all their funds back. A cryptocurrency lender is not regulated like a bank, so there’s no deposit insurance and no legal framework for who gets their money back first, like in a bankruptcy. It’s possible that Celsius’ investors, which include Quebec’s pension fund, may get their investment back before Celsius’ depositors will.

“This was yet another bank run. You’re not reinventing anything here. They were promoting their services as a better savings account but in the end you’re just another unsecured lender,” said Cory Klippsten, CEO of Swan Bitcoin, who has been publicly skeptical of Celsius’ business model for years.

“This news is difficult”

Lending platforms such as Celsius have come under scrutiny recently because they offer yields that normal markets could not support, and critics have called them effectively Ponzi schemes. It is the second notable collapse in the cryptocurrency universe in less than two months. The stablecoin Terra imploded in early May, erasing tens of billions of dollars in a matter of hours. 

Celsius said it had “activated a clause in our Terms of Use” that allows it to halt trading.

“We understand that this news is difficult, but we believe that our decision to …….

Source: https://www.cbsnews.com/news/celsius-binance-bitcoin-trading-pause-cryptocurrency-prices/

Leave a comment

Your email address will not be published. Required fields are marked *