Crypto Debacle at Celsius Rattles Market Already Shaken by Terra

Jun 20, 2022

Crypto Debacle at Celsius Rattles Market Already Shaken by Terra

Anxiety is growing across the crypto market just a month after Terra's collapse sent it reeling. The new crisis has called into question the stability of many popular cryptocurrencies and has investors scrambling to understand what is happening.

Celsius Network Ltd., one of the largest lenders in crypto and a major player in the DeFi sector, has announced on Sunday that it is halting all withdrawals, swaps, and transactions after weeks of speculation about its ability to deliver on the high returns promised on some of its products, including yields as high as 17%. As a result of this move, a platform with registered entities around the world and billions of dollars in digital coins under management effectively halted trading, accelerating a sell-off already underway in the broader market amid concerns over prospects for tightening monetary policy this week ahead of a Fed meeting.

The recent news about Celsius has only added more uncertainty to the market, according to Vijay Ayyar of Luno. “With the Fed's decision and concerns about high-yield investment products, there is a lot of pressure on prices right now.”

The cryptocurrency market and its associated DeFi sector have been dealt a severe blow by the recent meltdown. DeFi is a largely unregulated sphere of activity that has emerged in response to traditional finance. While it offers users more control and potentially higher returns, it also comes with greater risks and fewer safeguards.

In May's collapse of the TerraUSD (UST) stablecoin and its sister token Luna captivated the attention of investors, but one of the main attractions of the project had been its promise of a 20% interest rate on UST deposits to Terra's blockchain-based lending project Anchor. However, Celsius – a centralized platform with operations and staff that sets it apart from DeFi – has also been deeply involved in the space, including making an investment in Terra and employing multiple risky strategies designed to earn high yields. This has raised questions regarding the platform's viability.

Both TerraUSD and Celsius offered investors the opportunity to earn high yields, which in turn drove up demand for the services. However, this demand was largely dependent on a continual influx of new users to the system or on borrowing and investing money to pay the high rates. After the collapse of TerraUSD, Celsius acknowledged its own exposure to the crisis but claimed it was able to extricate itself relatively quickly. However, across the crypto space as a whole, interest in protocols offering high yield lending has declined sharply since Terra's implosion.

On Monday, tokens linked to lending and borrowing protocols took a hit, with the Celsius native token dropping 50% to 23 cents as of 11:30 a.m. in New York, according to CoinGecko. Other tokens in the same space fared no better, with Aave, Maple, and Compound slumping 12%, 15%, and 13%, respectively.

Regulatory and on-chain analyst Burak Tamac of CryptoQuant believes the plunge in the price of Celsius' $CEL token could be indicative of similar contagion risks across similar financial products. This is likely due to the recent sell-off in UST/LUNA, which has spooked investors and caused them to pull out of other potential investments.

Recently, the MVIS CryptoCompare Digital Assets 100 Index, an index containing 100 of the market's most valuable tokens, dropped sharply by 17%. As a result, the total value of the market fell below $1 trillion after peaking in November at $3 trillion. According to CoinGecko, almost $1 trillion has been wiped out in losses over the past two months alone.

Crypto lending has recently been subject to increased regulatory scrutiny. BlockFi, one of the largest providers of crypto lending services, agreed to pay $100 million to settle allegations from the US Securities and Exchange Commission that it had illegally offered a product that paid customers high-interest rates to lend out their digital tokens.

The halt on withdrawals from Celsius came as a surprise to many, especially in light of CEO Alex Mashinsky's recent tweet assuring customers that there would be no problem withdrawing their funds.

According to Celsius, the move is intended to put the company in a better position for long-term withdrawal obligations. It added that users would continue to accrue rewards during the pause.

https://liquidity-provider.com/app/uploads/2022/06/unnamed-2.png

The news comes as a blow to the crypto community, which has already been rocked by turbulence in the markets. Friday's disappointing inflation data from the US has led to fears of faster interest rate hikes, which in turn has put pressure on riskier assets like digital currencies. Bitcoin has already lost half its value this year, while Ether has shed two-thirds of its worth.

https://liquidity-provider.com/app/uploads/2022/06/unnamed.png

According to data from the Ethereum blockchain, the largest digital wallet holding CEL tokens is owned by Celsius itself, with over 184 million CEL tokens - equating to 26.6% of the total supply in circulation. Mashinsky confirmed on Twitter on weekends that Celsius hadn't been selling the token.

Subscribe Our Newsletter

Today's Most Active Big Cap Stocks Include Nvidia, Coty, Coinbase, Terex, and Others.

Milena

Today’s Most Active Big Cap Stocks Include Nvidia, Coty, Coinbase, Terex, and Others.

Today's most active big cap stocks are Nvidia, Coty, Coinbase, Terex, and others. Here is why.

Stocks
Stock Market Predictions 2024: What to Expect Amidst Recent Market Moves

Nato

Stock Market Predictions 2024: What to Expect Amidst Recent Market Moves

Get insights into stock market predictions 2024, with a focus on recent market movers, including Ford, Walgreens and Domino's Pizza.

Companies
Get the ultimate solution: B2BinPay Get the ultimate solution: B2BinPay
Sponsored
Nato

Stock Chart Patterns Cheat Sheet for Successful Trading
Discover the secrets of trading with a stock chart patterns cheat sheet to make informed decisions effortlessly.

discover
What Are Index Funds? Investment Guide

Constantine

What Are Index Funds, and How do you invest in them?

Learn what index funds are, what varieties they come in, what advantages they offer, and how to start investing from scratch and make your first profit.

Investing
Contact us bg

Contact Us

Contact the Liquidity Provider
for any questions and advertising inquiries

    Please fill out this contact form to get in touch with us

    / 3000

    By clicking “Get in touch” button, you agree to the privacy policy

    Successful!
    Thank you for your request.
    We will contact you shortly.
    Close

    Alexander

    What is a Fair Value Gap? A Guide to Trading Market Imbalances

    What is Fair Value Gap

    Vitaliy

    Triangle Patterns in Trading: Mastering Ascending, Descending & Symmetrical Strategies for Maximum Profit

    Triangle Patterns in Trading: Ascending, Descending & Symmetrical Guide

    Alexander

    What Is COTI? Payments, Token & Price Prediction

    What is a COTI coin

    Constantine

    Best Copy Trading Software in 2025

    Best Copy Trading Software in 2025

    Alex

    What Is an AI Agent? The Future of Finance Explained

    AI Agent Explained

    Constantine

    How to Start a Liquidity Provider Business?

    How to Start a Liquidity Provider Business

    Constantine

    How to Start a White Label Brokerage?

    How to start a white label brokerage

    Constantine

    How to Start a Multi-Asset Brokerage?

    How to Start a Multi-Asset Brokerage

    Hazem

    Crypto Ransomware – How They Happen and How to Avoid Them

    Crypto ransomware explained

    Constantine

    Best Web3 Browsers in 2025

    Best Web3 Browsers

    Constantine

    Best DAO Projects in 2025

    Best DAO projects in 2025

    Alexander

    Crypto Nodes That Pay: Your 2025 Guide to Top Passive Income Opportunities in Crypto

    crypto nodes that pay

    Alex

    Pi Network: Scam or Groundbreaking Crypto? The Full Analysis

    Pi Network Explained

    Constantine

    Triple Net Lease: Meaning, Benefits, and Strategies Explained

    Triple Net Lease

    Constantine

    Hanging Man Pattern: How to Identify and Trade It Effectively

    Hanging Man Pattern

    Alex

    5 Infinite Banking Mistakes That Could Cost You Thousands

    Infinite Banking Mistakes to Avoid

    Aleksander

    Solana Firedancer: Solving Solana’s Biggest Problems with a New Engine

    Solana Firedancer explained

    Alexander

    What Is an Interest Coverage Ratio? How to Use This Financial Metric to Evaluate Company Health

    Interest Coverage Ratio Explained

    Hazem

    After-Hours Trading: Can You Trade After Financial Markets Close?

    After-Hours Trading Explained

    Alexander

    How to Scale a Crypto Exchange Business and Stay Competitive

    how to scale crypto exchange business

    Constantine

    Crypto CrypticStreet Review: The Future of DeFi and Secure Crypto Trading

    Crypto CrypticStreet Review: The Future of DeFi and Secure Crypto Trading

    Alexander

    Bitcoin Power Law Explained: How It Shapes BTC’s Long-Term Growth

    Bitcoin Power Law Explained: How It Shapes BTC’s Long-Term Growth

    Hazem

    Megaphone Pattern​: What Is It? How to Use It In Trading

    Megaphone Pattern​: How to Read & Trade with It

    Constantine

    Top 5 Liquidity Bridge Providers in DeFi

    Top 5 Liquidity Bridge Providers in DeFi
    liquidity-provider-logo
    • News
      • Stock Market Forecast
      • Stocks
      • Banks and Finance
      • Companies
      • Crypto
      • Forex
      • AI
      • Technology
      • DeFi
      • NFT
    • Articles
      • Crypto Payments
      • Trading
      • Crypto Exchange Business
      • Forex Business
      • Fintech
      • Liquidity
      • FinTech Awards
      • Blockchain
      • Investing
      • NFT
      • DeFi
    • More
      • Videos
      • Liquidity Providers List
      • Crypto Payment Providers
      • White Label Brokerage Platforms
      • Broker CRM Platforms
    [email protected]

    © 2024 Liquidity Provider. All Rights Reserved

    Privacy Policy Cookie Policy
    This site is registered on wpml.org as a development site. Switch to a production site key to remove this banner.