It’s been a brutal first half of 2022 for crypto, as the industry riding high at the start of the year, has just had its worst week ever.
In the past two days several trading platforms halted withdrawals, companies have cut jobs and panicked investors have dumped their holdings. The result has been a market cap of crypto falling from its $3 trillion peak in November last year, to $1 trillion today.
Bitcoin, the most valuable cryptocurrency tumbled by 15% in the past 24 hours as it plunged to an 18-month low as well, falling below $23,000. Ethereum which is second to Bitcoin, fell 17%.
The sell-off comes shortly after investors backed out of the riskiest assets due to macroeconomic headwinds and rising interest rates. It’s worse than that, as the action on Monday showed a fundamental mistrust of crypto-currencies and the platforms that support them.
Below are some of Monday’s crypto lowlights:
The Celsius contagion effect
For weeks, there’s been growing concerns that Celsius, a popular crypto staking and lending platform, is in the middle of a liquidity crunch. Celsius provides users with yield of up to 18.63% on their deposits. This is similar to a product offer from a bank, except in this case – as with all crypto – there are no regulatory safeguards.
Celsius’ CEL token fell from over $7 to around 33 cents in 2021 and it’s down more than 50% in the past week. Celsius itself remains the biggest holder of the token. However, the company’s $26 billion in client funds has more than halved since October last year.
Celsius previously admitted that it was losing funds but it didn’t specify an exact amount, which is as a result of the $120 million hack of BadgerDAO, a decentralized finance platform.
The market was shocked on Monday when Celsius announced that all withdrawals, swaps, and transfers between accounts have been put on hold due to “extreme market conditions.” In a memo addressed to the Celsius Community, it was stated that the move as meant to “stabilize liquidity and operations.”
“We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations,” the memo said.
The company effectively locked up its $12 billion cryptocurrency assets under management, which raised concerns about its solvency. The surprising news became scattered across the crypto industry, reminding many of what happen in May, when a failed U.S. dollar-pegged stablecoin project lost $60 billion in value and dragged the wider crypto industry down with it.
Coinbase, a crypto trading platform also saw 11% its shares dropped on Monday, which it is its lowest since it became a public company in April 2021.
Isa Muhammad is a writer and video game journalist covering many aspects of entertainment media including the film industry. He's steadily writing his way to the sharp end of journalism and enjoys staying informed. If he's not reading, playing video games or catching up on his favourite TV series, then he's probably writing about them.
