It is already the second crypto crash in a month: a large number of cryptocurrencies plunged sharply on Monday, often with percentages in the double digits. Bitcoin, the largest cryptocurrency, lost nearly 15 percent of its value within 24 hours. The price of one bitcoin was below $24,000 at the end of Monday morning, its lowest point since December 2020. Ethereum — the second-largest coin by market value — lost 19 percent.
The crypto market has been in dire straits for some time now. The market value of the total crypto market was more than 1,100 billion dollars at the beginning of the afternoon on Monday. In November last year, all coins together were worth 2,900 billion.
The immediate reason for the new turmoil in the crypto markets are financial problems at ‘bitcoin bank’ Celsius. The platform where investors can store their crypto coins announced Monday to temporarily freeze all assets of the 1.7 million customers.
Celsius refers to ‘extreme market conditions’ as the reason. According to the Financial Times many investors started their digital credit over the weekend take away from Celsius, fearing that the crypto bank will no longer be able to meet its obligations in the short term. Celsius calls the asset freeze “the most responsible action we can take to protect our community.”
Value of credits halved
Celsius is one of the largest bitcoin holders in the world, with over 151,000 coins in its wallet. Part of the business model is for investors to lend their coins to Celsius in exchange for an interest rate of up to 17 percent. With the borrowed coins, Celsius is again financing new crypto projects, which should yield returns.
But as the cryptocurrency market plunged sharply in recent months, the value of Celsius’ assets also fell significantly. At the end of December, all crypto coins that the bank owned were still worth $ 24 billion, by mid-May that value had halved to 12 billion.
The last time there was panic in the crypto market was a month ago. The unrest then arose after the collapse of the Terra currency, which was considered stable. Its value is theoretically linked to the dollar. But when one major investor got out, others appeared to get out, resulting in a crash. Because all stablecoins are pegged to the value of a regular coin, usually the dollar, almost the entire crypto market went down.
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