The difficulties recently encountered by the Celsius cryptocurrency exchange platform prove, once again, the instability of this market. The U.S. buy-and-resell company announced on June 12 that it would freeze withdrawals and transactions on its site as all digital currencies continue to slump.
Celsius services shut down
For several days, the 1.7 million users of the Celsius cryptocurrency exchange platform can no longer withdraw, exchange or transfer decentralized currencies from their account. The reason cited by the company for this sudden stop is that of the extreme market situation. ” We are taking this necessary action in the interest of our entire community to stabilize liquidity and operations while we take steps to preserve and protect assets. Additionally, customers will continue to accrue rewards while services are discontinued, in line with our commitment to them. “, she specifies in a communicated.
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By rewards, Celsius means a return on investment. The platform is known and used for its “staking” principle. It is a process for users to lock up their assets in a smart contract to participate in blockchain operations. By doing this, investors earn a percentage of transactions calculated through an interest rate. That of Celsius can be as high as 18.63%.
The platform was also based on a principle of rehypothecation, an operation that allows banks to use the assets deposited as collateral by their customers to insure their own loans. In return, customers benefit from loans at more attractive rates or are offered discounts. Celsius guaranteed its users to be able to withdraw their money at any time, within three days. Stopping withdrawals prevents them from recovering their cryptocurrencies.
For the moment, no date for the resumption of these services has been announced by the company, which believes ” that there is a lot of work to be done to consider the different solutions, this process will take time, and there may be delays “.
The value of cryptocurrencies is collapsing
Celsius’s announcement has greatly shaken the crypto sphere which is based on an extremely volatile market. Bitcoin price fell below $22,000, its lowest point in 17 months, while ether lost 15% of its value, even dropping below $1,000.
This violent cryptocurrency recession is reminiscent of the collapse of the stablecoin TerraUSD and Luna, the cryptocurrency it was backed by, during the month of May. A loss of 300 billion dollars had been deplored following this crash. In addition, Celsius had a close relationship with the Terra blockchain. The platform injected $500 million into Anchor, one of Terra’s three main protocols, to keep the stablecoin above water, to no avail.
If for the moment the future of Celsius is uncertain, other trading platforms could find themselves in the same situation. This is the case of Coinbase, which revealed that it intended to lay off 1,100 employees, or 18% of its workforce, because of the market recession.