It is the latest high-profile collapse of a pillar of the cryptocurrency industry.  These collapses have wiped out tens of billions of dollars of investor assets and sparked urgent calls to regulate the freeway industry.
Bitcoin traded at around $ 22,400 late Monday, falling more than 16% yesterday.  Ethereum, another widely monitored cryptocurrency, fell about 17%.  Investors were selling more risky assets, such as digital currencies and technology stocks, as the Federal Reserve raises interest rates to fight high inflation.
On Sunday, the cryptocurrency lending platform Celsius Network announced that it was suspending all withdrawals and transfers between accounts in order to “honor, over time, the commitment obligations”.  Celsius, with about 1.7 million customers and more than $ 10 billion in assets, gave no indication in its announcement when it would allow users to access their funds.
In exchange for customer deposits, the company pays extremely generous returns, over 19% on some accounts.  Celsius takes these deposits and lends them to create a return.
Lending platforms like Celsius have come under scrutiny recently because they offer returns that normal markets could not support and critics call them effective Ponzi schemes.
Francisco Orduna, 36, said he referred to Celsius about a year ago and was drawn to the company’s promises of high returns on its cryptocurrencies.
“It was easy to overlook the risk because users were accustomed to these weekly Celsius interest payments,” Orduna said.  He made most of his money from degrees Celsius late last week, but said he still had leftovers trapped on the platform.
It is the second significant collapse in the cryptocurrency universe in less than two months.  The stablecoin Terra collapsed in early May, writing off tens of billions of dollars in a matter of hours.  Stablecoins are considered relatively safe because they are supposed to be backed by hard assets such as a currency or gold.
Just like Terra, Celsius was sold as a safe haven for cryptocurrency holders to deposit their money.  Even when Celsius failed, the company’s website advertised that users could “access your currencies at any time, keep them safe forever.”
“There is a lot of work ahead, as we look at different options, this process will take time and there may be delays,” Celsius said in a statement.
The move surprised investors and depositors.  In online chats, they wondered why their investments were not protected.
Orduna said he withdrew his money from degrees Celsius in part because of the Terra explosion.  There were reports that Celsius had invested part of its users’s funds in Terra and there were concerns that Celsius was taking a very high risk with depositors’ funds.
“I started to worry if the performance they offered was really sustainable,” he said.
It is not clear whether Celsius degree depositors will get all their funds back.  A cryptocurrency lender is not controlled like a bank, so there is no deposit insurance and no legal framework for who will get their money back first, such as in the event of bankruptcy.  Celsius investors, including the Quebec Pension Fund and the prominent WestCap venture capital fund, are likely to get their investment back before Celsius depositors do.
WestCap did not respond to a request for comment.  The Pension Board of Canada also did not respond to a request for comment.
“It simply came to our notice then.  You are not reinventing anything here.  “They promoted their services as the best savings account, but in the end, you’re just another unsecured lender,” said Cory Klippsten, CEO of Swan Bitcoin, who has been publicly skeptical of Celsius’ business model for years.
Terra, and the iconic Luna, offered similar returns on customer deposits.  These chips collapsed after huge customer withdrawals that forced Terra operators to liquidate all assets used to support their currencies.  The collapse of Terra has sparked calls for reform from the cryptocurrency industry and calls for congressional regulation.