Bitcoin and other cryptocurrencies fell in value on Monday after a major cryptocurrency lender declared bankruptcy and froze all withdrawals from its platform, citing severe market circumstances.
It's the latest high-profile fall of a bitcoin industry pillar. These meltdowns have wiped out tens of billions of dollars in investor assets, prompting urgent calls to regulate the unregulated sector.
Bitcoin Falls to Late-2020 Levels
Bitcoin was selling at around $23,400 on Monday afternoon, down more than 16% from the previous day. Ethereum, another popular cryptocurrency, was down more than 20%. As the Federal Reserve raises interest rates to battle excessive inflation, investors have been dumping riskier assets such as digital currencies and technology companies.
Celsius Network, a cryptocurrency lending platform, stated on Sunday that it was suspending all withdrawals and transfers between accounts to meet withdrawal commitments over time.
In its release, Celsius, which has over 1.7 million users and more than $10 billion in assets, did not say when customers will be able to access their funds. In exchange for customer deposits, the organization provides extremely high-interest rates, up to 19% on some accounts. Celsius receives deposits and lends them out to make a profit, WGAL reported.
This is now the trillion-dollar question, and it has sparked heated debate among cryptocurrency market experts. There is no dispute that we are in a bear market; the only question is whether we are approaching the end of it.
Others have cautioned that after finally falling below $30,000 after holding that level as a bottom for 18 months, bitcoin may now be on the cusp of a collapse,resulting in losses comparable to the last two falls following the 2013 and 2017 peaks.
Cryptos Temporarily Halt Wtihdrawals
According to Marcus Sotiriou, an analyst at the UK-based crypto broker GlobalBlock, current speculation is around Celsius being careless with customer cash.
He said that there are fears that if clients try to redeem holdings Celsius would run out of liquid cash to pay them back. "They are taking enormous loans against their illiquid positions to pay off their customer redemptions, but they might run out of funds within 5 weeks," he added.
Binance, a leading cryptocurrency exchange, also momentarily blocked bitcoin withdrawals, further undermining investor trust. However, the crypto market's downfall began long before Celsius and Binance encountered troubles, with both businesses blaming the larger crypto market.
Except for occasional price increases, bitcoin and other top cryptocurrencies have been on a downward trend since the end of last year. Rising interest rates, inflation, and the capitulation of tech stocks during this period all contributed to its demise and fueled predictions of a "crypto winter," as per Independent.
The fall is the result of investors' anxiety about the state of the economy. They are concerned that the Federal Reserve's interest-rate increases, intended to combat inflation, would dampen the economy and, in particular, spending. Businesses struggle to market their products and services if consumers aren't spending, and they won't continue to invest.
The second argument, which is related to the first, is that when everyone is uncertain risk assets suffer the price. This is especially true in the case of technology and cryptocurrency, which primarily offer promises and ask investors to acquire them. So it's no wonder that tech stocks and cryptocurrency values have been moving in lockstep for quite some time.
The final argument to make is that the cryptocurrency business has been severely harmed by its demons: controversies. These scandals have reignited public distrust in the sector. We've had two major controversies in the last month, according to The Street.
Related Article : Joe Biden Insists Record Inflation in 40 Years Is Caused by Putin, Not Wayward Sanctions Pushed by the US
@YouTube
