Concerns about a recession and problems at a cryptocurrency lender lead to panic selling at Bitcoin & Co. The price of the oldest and most important cyber currency temporarily fell by almost 23 percent on Monday to $ 22,560 (EUR 21,633), heading for the biggest daily loss since the stock market crash in March 2020. The same was true for the second most important internet currency, Ethereum, which collapsed by more than 30 percent to $1165.
Investors fear that the US Federal Reserve will bring the economy to a standstill with drastic rate hikes. Due to persistently high inflation, an interest rate hike of 0.75 percentage point in July is considered certain. Such a big move could come as early as Wednesday, when the Fed discusses its monetary policy. Investors estimate the chance of this at 25 percent. As a result, they fled risky assets such as stocks or cryptocurrencies. The combined market value of all nearly 20,000 cyber currencies then fell below the $1 trillion mark, industry service CoinMarketCap.com said.
Problems with Celsius Network
In this melee came the announcement from Celsius Network that it would be suspending withdrawals and transfers between accounts. The company stated in a blog post, “We are taking this necessary action to stabilize liquidity and operations while taking steps to preserve and protect assets.” The digital stock certificates (“tokens”) issued by Celsius then tore through more than 50 percent on the Bitrex exchange to $0.181.
Celsius is a big cryptocurrency lender, said Emden Research analyst Timo Emden. “The crash of the token brings back bad memories of the recent collapse around TerraUSD/Luna.” The reason for this was the loss of confidence in Luna. Transactions with this freely tradable cyber currency should guarantee the TerraUSD rate obligation.
Celsius Network lends digital money, provides crypto-backed loans and offers savings products to customers who invest their cyber currencies with the company. On its website, the company advertises an annual return of up to 17 percent. As of May 17, the company had processed $8.2 billion in loans and $11.8 billion in assets under management, according to its website. Last year, Celsius raised $750 million from investors, including Canada’s second-largest pension fund. The company was valued at $3.25 billion.
Crisis can go beyond the crypto world
Joseph Edwards, chief investment strategist for financials at asset manager Solrise, warned of contagion risks from the Celsius crisis that could extend beyond the cryptocurrency world. Tokens from Celsius rivals such as Aave or Compound fell nearly 20 percent on the Kraken exchange. The problem is that companies like Celsius operate in a gray area, says Matthew Nyman of law firm CMS. Unlike traditional banks, they are not subject to clear regulations with accompanying disclosure requirements.
Against this backdrop, assets from the cryptocurrency sector and companies involved in the blockchain technology underlying Bitcoin & Co flew out of the depots. Coinbase, Riot, Marathon and Silvergate each lost about 15 percent. The titles of the German Bitcoin Group, which operates a cryptocurrency exchange, temporarily lost 12 percent.
Microstrategy plunged nearly 30 percent. The software company has invested billions in Bitcoin. The same goes for electric car maker Tesla, whose shares lost 6.2 percent.
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
