The collapse of the not-so-stable coin UST last month brought the digital asset economy down with it and exposed more vulnerable players.
For the first time in over a year, the global market cap of cryptocurrencies fell below the $1 trillion mark.
All withdrawals, swaps and transfers for users were paused by Celsius late last night. The firm stated in a press release that it was acting in the interests of its community of about 2 million people and that it was putting Celsius in a better position to honor its withdrawal obligations.
As of May 17, Celsius had $12 billion in assets. The company claimed in April that it owned more of the virtual currency than public companies.
In the past, the firm made headlines for raising one of the biggest funding rounds in 2021, an oversubscribed $750 million, while simultaneously suspending (and later firing) its former CFO for sexual assault allegations.
“You think there’s an arbitrage but what they’ve really done is sold volatility.” Cory Klippsten, CEO of Swan Bitcoin
As sell-offs across the market continue and the Celsius situation heightens already bearish market sentiment, the two largest cryptocurrencies by market cap, bitcoin and ether, have fallen in the past 24 hours.
There is no firm answer at the moment, but many participants indicated that Celsius may be riskier than they thought, with some pointing towards a lack of confidence in its operations. That sentiment resulted in a bank-run scenario similar to what we saw last month with UST and LUNA: investors didn't want to get stuck on the platform and, in anticipation of a crisis, they wanted to get out first.
"People were withdrawing their coins from Celsius and they didn't have enoughliquidity to meet redemption requests." They would be bankrupt if they had fulfilled all their redemption requests.
Alex Mashinsky did not reply to requests for comment.
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