- Crypto lending firm Celsius halted all account withdrawals on Monday, raising fears that it is set to go bankrupt.
- Investors are concerned. If Celsius falls, other sections of the cryptocurrency market may suffer.
- Many analysts believe the debacle’s ramifications will be restricted to cryptocurrency.
Crypto News: A liquidity issue at bitcoin loan firm Celsius has investors concerned about a wider contagion that might bring down other significant market players.
Celsius suddenly paused all account withdrawals, raising concerns that the company was likely to go bankrupt. The company lends money to customers in the same way that a bank does, but without the stringent insurance requirements that traditional lenders have.
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Bitcoin fell below $21,000 on Tuesday, extending the previous day’s severe falls and plunging deeper into 18-month lows. According to CoinMarketCap data, the total value of all digital tokens combined fell below $1 trillion for the first time since early 2021.
Crypto investors are concerned that the likely collapse of Celsius will exacerbate the damage already felt by the market following the bankruptcy of Terra, a $60 billion stablecoin initiative. Celsius was a Terra investor, but it had “little” stake to the project.
Celsius did not respond to several requests for comment from CNBC.
“Everyone is really bracing for more downside in the medium term,” said Mikkel Morch, executive director of crypto hedge firm ARK36.
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“Bear markets have a way of exposing previously hidden weaknesses and overleveraged projects so it is possible that we see events like last month’s unwinding of the Terra ecosystem repeat.”
Monsur Hussain, senior director of financial institutions at Fitch Ratings, said a liquidation of Celsius’ assets would “further rock the valuation of cryptoassets, leading to a wider round of contagion within the crypto sphere.”