Coined

Crypto lender Celsius pauses withdrawals on billions’ worth of customer assets as coins plunge, turning up the regulatory heat

Tuesday, June 14, 2022 by Snacks

Extra-rough Monday… Bitcoin dropped below $24K for the first time since 2020 yesterday, sending ripples through the industry. Celsius, one of the biggest crypto lenders, halted transactions for its nearly 2M customers, citing “extreme market conditions.” Celsius manages ~$12B in assets, and it’s TBD when (and if) customers will get their $$ back.

  • Status quo: Users deposit crypto into Celsius with the promise of earning up to 18% in interest payouts. Celsius then reinvests the assets into crypto-related projects (like: crypto-mining).
  • Problem quo: The value of Celsius' holdings has plunged along with crypto prices. Yesterday, crypto market cap dipped below $1T for the first time since January ’21. Now analysts think Celsius could run out of funds within five weeks.
  • Even if it can repay customers, it would have to pull its money from other crypto investments — which could affect the entire market.

Moving like the market… Some thought crypto could be a hedge against inflation and stock-market moves. That hasn’t panned out so far this year. While stocks tumbled, the crypto market lost $200B in value over the past week — and $2T+ in the past eight months. Celsius isn’t the only crypto company feeling the heat:

  • In the past month, crypto lender BlockFi and exchanges like Crypto.com, Coinbase, and Gemini have cut headcount.
  • Binance, the world's largest crypto exchange, temporarily halted bitcoin withdrawals (it blamed technical reasons).
THE TAKEAWAY

Crypto’s getting a reality check… It’s not just prices: from Stablegains to the Anchor Protocol, promises of big returns have lured investors to the high-flying world of crypto lending. But some of those investments have crashed and burned. Celsius’ freeze puts the spotlight on lawmakers and regulators, who could face more pressure to step in. Meanwhile, a bipartisan bill to regulate digital assets is already in the works.

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