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The Defiant

06/13/2022

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Celsius Freeze on Withdrawals Craters Crypto Market

Major DeFi Lending Platform Drops the Gate on Investors

Celsius Freeze on Withdrawals Craters Crypto Market

First came Terra. Now comes Celsius. 

On June 12, crypto lending platform Celsius froze withdrawals, transfers, and swaps for their users due to extreme market conditions. Crypto investors, already anxious after consumer prices spiked a staggering 8.6% in May, dumped tokens.

In the last 24 hours, Bitcoin has plunged almost 14% and Ethereum 16% in early morning trading New York time, according to CoinGecko. The crisis engulfing Celsius could pack the same wallop as the failure of Terra and its stablecoin UST in early May. Indeed, information came to light at the end of last month showing a possible link between Celsius and Terra. 

Run on the Bank

There’s little doubt the funk in the markets has spurred a “run-on-the-bank” scenario, said Kevin Murcko, the CEO and founder of Coinmetro, an exchange based in Estonia.

“I would like to believe that Celsius is merely facing a liquidity squeeze and will return to normal business operations in the near future,” Murcko told The Defiant. “However, if the issue is not resolved quickly, we might see another blow of confidence similar to the one that followed Terra ecosystem’s collapse.”

Withdrawal Obligations

 In a memo, the Celsius team wrote that it took this action to be “in a better position to honor, over time, its withdrawal obligations.”  Celsius assured customers that they will still accrue rewards during this pause. Celsius Network’s own token, CEL, lost 41% of its value on Monday. 

On the morning of June 12, Celsius CEO Alex Mashinsky tweeted that talking about Celsius freezes was spreading rumors and “misinformation”. 

Later on June 12, it was reported that Celsius sent over $320M worth of crypto to trading platform FTX.  On May 27, Nansen released a report that Celsius was partly responsible for the crash of the Terra Ecosystem.

“I guess now you have to hope that they’re not bankrupt but they just put too much of customer funds into illiquid/locked places […] Then maybe they can wait it out and pay users back,” tweeted Cobie, a prominent crypto writer with 700,000+ followers.

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