News

Topline The cryptocurrency market witnessed a major selloff on Monday morning with its overall market cap dropping below $1 trillion for the first time in over a year after major crypto lending platform Celsius announced it was suspending all withdrawals due to “extreme market conditions.”

The value of Bitcoin slumped to 2020 levels on Monday amid a market wide cryptocurrency sell off.

Key Facts Bitcoin’s value fell below $24,000—down nearly 14%—the lowest level it has been in 18-months following Celsius’ announcement.

Amid the selloff, crypto exchange Binance announced that it was temporarily suspending Bitcoin withdrawals which CEO Changpeng Zhao said was due to a “stuck transaction causing a backlog.”

Ethereum, the world’s second most valuable cryptocurrency by market cap, saw its value crater by more than 18.3% dropping below $1,200.

The market wide selloff has also affected other popular tokens like Binance’s BNB, Dogecoin and Solana, which are down 15%, 18.3% and 18.9% respectively,

In a blog post published after midnight on Monday, Celsius said it was “pausing all withdrawals, [currency] swap, and transfers between accounts,” noting that it was doing so to allow itself to meet all of its withdrawal obligations in the future.

Following the announcement, the value of Celsius’ own token (CEL) slumped by more than 46%, and as of early Monday morning, it was trading at 21 cents—massively down from around $2 in early May and $7 in June last year.

According to its website, Celsius claims it held $11.8 billion in assets as of May 17, has processed $8.2 billion in loans and has around 1.7 million customers.

Tangent The suspension of withdrawals comes just a day after Celsius founder and CEO Alex Mashinsky hit out at critics on Twitter, accusing them of spreading misinformation and FUD—a popular crypto acronym for “Fear, Uncertainty, Doubt.” Responding to a tweet by Mike Dudas, the founder of crypto news outlet The Block, Mashinsky wrote: “Mike do you know even one person who has a problem withdrawing from Celsius?… If you are paid for this then let everyone know you are picking sides.”

Key Background While Celcius’ announcement appears to have accelerated the selloff on Monday, the crypto market had been trending downwards over the weekend, due to other external economic factors. Crypto investors have been spooked by surprisingly high inflation and an expected interest rate hike by the Federal Reserve later this week. On Friday, the Labor Department released data which showed annual inflation in the U.S. jumped to 8.6% in May. The unexpected surge is the largest 12-month increase in consumer prices the country has witnessed in over 40 years. The Federal Reserve is set to meet later this week, where it is expected to announce a major hike in key interest rates.

News Peg Questions have been raised about crypto platforms like Celsius that promise massive yields to their customers after last month’s high-profile collapse of another high-yielding stable coin, Terra, and its companion token, Luna, last month. According to the Financial Times, Celsius was also impacted by the overall decline in the cryptocurrency market in the last few months with its overall assets dropping from a value of $24 billion in December 2021 to $11.8 billion last month. Celsius runs one of the largest crypto lending operations in the world and it managed to raise $750 million in funding last year from the likes of investment firm WestCap and Canadian pension fund manager Caisse de dépôt et placement du Québec. Celsius has also borrowed $500 million from the U.S. dollar-pegged stable coin Tether, down from an originally planned loan of $1 billion.