In the latest indicator of the financial market crisis affecting the crypto sphere, Bitcoin plunged as much as 14% on Monday. Meantime, Major U.S. cryptocurrency lending business Celsius Network suspended withdrawals and transfers, citing “extreme” market circumstances.
The action by Celsius caused a sell-off in cryptocurrencies. This sell-off caused their value to fall below $1 trillion for the first time since January 2021 on Monday; this raised concerns that the sell-off may spread to other assets or firms. Cory Klippsten, CEO of Swan Bitcoin, a bitcoin savings platform, explained that almost anything could be systemic in crypto since the entire industry is over-levered. It’s all a jigsaw puzzle. Celsius, situated in New Jersey, has roughly $11.8 billion in assets; it offers consumers who deposit cryptocurrencies with its interest-bearing platform products. It then earns money by lending out cryptocurrency.
Following Celsius’s statement, bitcoin (BTC=BTSP) fell to an 18-month low of $22,725 before marginally recovering to roughly $23,265. The second-largest token, ether, fell by 18 percent to $1,176, its lowest level since January 2021. Companies with a cryptocurrency exposure have previously cautioned that falling token values might have unintended consequences; such as triggering margin calls. Joseph Edwards, head of a financial strategy at fund management company Solrise Finance, said in this regard that it’s still an uneasy situation; moreover, he added that there’s some risk of contagion surrounding crypto in general.
In recent weeks, crypto markets have plummeted; meantime, increasing interest rates and inflation led investors to flee riskier assets across financial markets. Investors increased their bets on Federal Reserve rate rises after U.S. inflation data on Friday showed the highest price increase since 1981, pushing markets to prolong their sell-off on Monday. That was most likely the primary cause of the crypto market’s decline. Infrastructure Capital Management’s chief investment officer, Jay Hatfield, said in a letter on Monday.
The collapse of the terraUSD and luna tokens in May, followed by Tether, the world’s largest stablecoin, momentarily losing its 1:1 peg with the dollar, has spooked cryptocurrency investors.
This year, Ethereum has lost almost 67 percent of its value. According to the company’s website, customers who move their crypto to Celsius’s platform can receive an annual return of up to 18.6 percent.
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