A POPULAR cryptocurrency lender called Celsius announced on Monday that it has indefinitely halted most transactions on its platform.
"Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, swap, and transfers between accounts," it said.
"We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations."
The move comes after weeks of tumult and upheaval in the crypto market since early May.
Bitcoin's price has been cut nearly in half since May 1, while Ethereum has lost more than 50% of its value in the last six weeks.
Celsius' own crypto token, CEL, is trading at just 20 cents per coin after tanking from $3 in April, according to CoinMarketCap.
Any cryptocurrency investor must be aware that it's not a guaranteed way to make money.
Their values are highly volatile and can make large swings with no notice, meaning you may lose all the cash you put in.
That's why it's important to not invest more than you can afford or into anything you don't understand.
There's also scant regulation for cryptocurrency firms, meaning you're without protection if and when things go wrong.
Most read in News Money
CROSSED A LINE
I'm getting my money back after I had to pay my neighbours £237k over 18ins
Martin Lewis urges drivers to use simple trick to fill up their car for less
Nationwide debit card warning as thousands of customers are sent faulty cards
UK 'heading for recession' as GDP falls 0.3% in April amid cost of living crisis
What is Celsius?
Celsius is a lending platform that allows cryptocurrency owners to take out loans against their coins or deposit coins and earn interest while the platform lends their coins elsewhere.
It works like a bank, but with crypto instead of cash and no brick-and-mortar store or FDIC backing on your investment.
The company has touted that users can earn up to 17% APY by depositing 43 variations of crypto, and Celsius sends out payments weekly.
Loans start with interest rates as low as 1%, and there are no fees on the platform.
More than 1million crypto traders use Celsius, making it one of the most popular cryptocurrency lending sites.
In August 2021, the platform announced it amassed more than $20billion in crypto assets after holding just $1billion a year prior.
Celsius, and other crypto lenders like it, have run into trouble with regulators in the past.
New Jersey ordered a cease and desist on certain Celsius lending products last year, and at least three other states have considered similar actions, according to The Verge.
In addition to the risks associated with the volatility of crypto trading, utilizing a platform like Celsius means crypto owners must give up control of their coins to the platform.
"There’s a popular saying amongst crypto veterans: not your keys, not your coins," Frank Corva, senior analyst for crypto and blockchain at Finder, told The Sun.
"Giving up control of your private keys in an effort to obtain yield on your crypto assets adds another layer of risk to the investment."
Celsius freezes withdrawals
The cryptocurrency market took a significant nosedive this weekend after stumbling through May and early June.
From Sunday, June 12 through the morning of June 13, nearly $1billion was liquidated, according to Watcher Guru.
That downturn contributed at least in part to Celsius' decision to suspend withdrawals, swaps, and transfers.
"We are taking this necessary action for the benefit of our entire community in order to stabilize liquidity and operations while we take steps to preserve and protect assets," the company said.
The Financial Times reported that Celsius' assets dropped from $24billion in March to around $12million last month, before this week's downturn.
However, a number of other factors may have contributed to the decision from Celsius chief executive Alex Machinsky.
"There has been a lot of speculation about what is happening behind the scenes at Celsius, but it’s hard to know for sure what has prompted the company to halt withdrawals and transfers for customers on the platform," Mr Corva said.
"It does seem that if Celsius does survive whatever shocks it’s currently experiencing, Machinsky and his team will likely be tied up in legal battles with both regulators and clients for years to come."
When Celsius announced the transaction halt on Twitter, many users took to the replies to express their dissatisfaction.
"This is ridiculous. Done with Celsius. Let me withdraw and disappear," one user wrote.
Others critiqued Celsius for advertising that users would have access to their crypto "whenever," and some accused the platform of attempting a "rug pull" to cash out and hurt investors.
"Trust in Celsius has been lost, which is a very difficult situation to recover from in the crypto space," Mr Corva said.
In cases when platforms freeze transactions like Celsius did, users, unfortunately, have little to no recourse.
Anyone with money in Celsius can only watch their account value fluctuate until the platform lifts the halt.
"When you put your digital assets into the custody of a third party centralized finance (CeFi) lending service like Celsius, you temporarily forfeit your rights to access those assets," Mr Corva said.
"That temporary forfeiture can become permanent if a CeFi company like Celsius goes bankrupt, and is forced to liquidate all of the assets in its custody."
Celsius has not yet provided a timeline for when users will be able to transfer and withdraw funds, but the platform "will continue to share information with the community as it becomes available".
Read More On The Sun
I’m a cleaning expert – 3 things you MUST do to banish summer allergies
For more crypto news, The Sun explained the rise, fall, and resurrection of Luna.
And we broke down the price of the popular altcoin Shiba Inu.
Source: Read Full Article