The fall of Bitcoin continues after a major cryptocurrency lender shuts operations

14 Jun 2022 , 10:38 AM

Bitcoin and other cryptocurrencies fell in value on Monday after a major cryptocurrency lender froze all withdrawals from its platform, citing “extreme market conditions.”

It’s the most recent high-profile failure of a crypto industry pillar. These financial meltdowns have wiped out tens of billions of dollars in investor assets, prompting urgent calls for regulation of the unregulated industry.

Late Monday, bitcoin was trading for around $22,400, down more than 16% from the previous day. Another highly followed cryptocurrency, Ethereum, was down nearly 17%. As the Federal Reserve raises interest rates to battle excessive inflation, investors have been selling riskier assets such as digital currencies and technology companies.

Celsius Network, a cryptocurrency lending platform, announced on Sunday that all withdrawals and transfers between accounts would be halted in order to “meet, over time, withdrawal commitments.” Celsius, which has over $10 billion in assets and 1.7 million subscribers, offered no indication in its announcement of when members might be able to access their accounts.

The company paid out exceptionally generous rates in exchange for consumers’ deposits, up to 19% on some accounts. Celsius trades in those deposits and lends them out to earn money.

Lending platforms like Celsius have recently come under fire for offering returns that conventional markets could not sustain, prompting critics to label them as basically Ponzi schemes.

It’s the cryptocurrency world’s second major fall in less than two months. In early May, the stable coin Terra crumbled, wiping out tens of billions of dollars in a matter of hours. Because they’re supposed to be backed by actual assets like a currency or gold, stablecoins have been thought to be reasonably safe.

It’s unclear whether Celsius depositors will be reimbursed in full. Because a cryptocurrency lender is not regulated like a bank, there is no deposit insurance and no legal framework in place to determine who gets their money first in the event of a bankruptcy. Celsius’ investors, which include Quebec’s pension fund and the well-known venture capital firm WestCap, could get their money back before Celsius’ depositors.

Due to strict laws imposed by the Indian government on returns generated from cryptocurrencies, Indian investors left the crypto bandwagon quite some time ago.