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Withdrawals frozen by major crypto lender Celsius Network With the likelihood of rapid increases in US interest rates shaking the volatile asset class, Bitcoin stabilised on Tuesday (June 14).
Bitcoin clawed its way back into positive territory after falling as much as 7.3% overnight to US$20,816, its lowest level since December 2020. It was last trading around $22,470 USD.
On Monday, the world's largest cryptocurrency fell 15%, its steepest one-day drop since March 2020. It has lost roughly half of its value this year and more than 20% since Friday alone. It has dropped nearly 70% since a record high of US$69,000 in November.
The New Jersey-based firm cited "extreme" market conditions. Celsius announced this week that withdrawals and transfers between accounts had been halted "to stabilize liquidity and operations while we take steps to preserve and protect assets."
The move, combined with expectations of more aggressive US Federal Reserve interest rate hikes following strong US inflation data last week, pushed the crypto market value below $1 trillion for the first time since January 2021.
Most cryptocurrency market participants were pessimistic about Bitcoin's near-term prospects.
"With the broader risk sentiment firmly negative, the sellers have had it all to themselves for a few days," said Richard Usher of cryptocurrency firm BCB Group. "It will take a significant shift in overall risk sentiment to significantly change the price."
Bitcoin's decline is likely to have repercussions for other companies with a stake in the cryptocurrency market.
On Tuesday, cryptocurrency exchange Coinbase Global announced that it would cut 18% of its workforce, or approximately 1,100 jobs, as part of efforts to cut costs amid volatile market conditions.
MicroStrategy, a major Bitcoin supporter, said last month that a drop below US$21,000 would trigger a demand for additional capital against a loan secured by some of its Bitcoin holdings.
This could result in it staking more Bitcoin against the loan or selling some of its vast holdings. Outside of business hours, the company did not immediately respond to a request for comment.
MicroStrategy and Coinbase both fell more than 5.5 percent in premarket trading on Tuesday as Bitcoin fell, but were up 8.11 percent and 0.27 percent, respectively, by the afternoon.
Token No. 2 Ether has also recovered somewhat after falling as much as 10% to US$1,075, a new 15-month low. Ether is down 75% from its November record high of $4,869 USD.
'Panic'
Celsius, which has approximately $11.8 billion in assets, provides customers who deposit cryptocurrency on its platform with interest-bearing products. It then lends out coins in order to earn a profit.
In a note, Singapore fund manager QCP Capital wrote, "The market is now panicking about the impact and contagion if Celsius becomes insolvent."
The collapse of the TerraUSD and Luna tokens in May shook cryptocurrency investors, and Tether, the world's largest stablecoin, briefly broke its 1:1 peg with the dollar.
The decision by Celsius to suspend withdrawals has raised new concerns about the regulatory oversight of such crypto-lending platforms.
On Tuesday, US Securities and Exchange Commission chair Gary Gensler told an event that such platforms operated similarly to banks, and he questioned how they could offer such high returns.
"I warn the general public. If something appears to be too good to be true, it most likely is "He continued.
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