Crypto Contagion Fears Spread After Celsius Freezes Withdrawals

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Crypto contagion fears spread after Celsius Network freezes withdrawals

Bitcoin fell as much as 14 per cent on Monday after major U.S. cryptocurrency lending company Celsius Network froze withdrawals and transfers citing "extreme" market conditions, in the latest sign of the financial market downturn hitting the cryptosphere.

The Celsius move triggered a slide across cryptocurrencies, with their value dropping below $1 trillion on Monday for the first time since January 2021, sparking worries the rout might spill over into other assets or hit other companies.

"Almost anything can be systemic in crypto ... because the whole space is over-levered," said Cory Klippsten, chief executive of Swan Bitcoin, a bitcoin savings platform. "It's all a house of cards."

Celsius CEO Alex Mashinsky and Celsius did not respond to Reuters requests for comment.

New Jersey-based Celsius, which has around $11.8 billion in assets, offers interest-bearing products to customers who deposit cryptocurrencies with its platform. It then lends out cryptocurrencies to earn a return.

After Celsius's announcement, bitcoin <BTC=BTSP> touched an 18-month low of $22,725, before rebounding slightly to around $23,265. No.2 token ether dropped as much as 18 per cent to $1,176, its lowest since January 2021.

Companies exposed to cryptocurrencies have previously warned that declines in token prices could have ripple effects, including by triggering margin calls.

"It's still an uncomfortable moment, and there's some contagion risk around crypto more broadly," said Joseph Edwards, head of financial strategy at fund management firm Solrise Finance.

Crypto markets have dived in the past few weeks as rising interest rates and surging inflation prompted investors to ditch