Bitcoin plunged to its lowest level since 2020 on Monday after major U.S. cryptocurrency lending firm Celsius Network froze withdrawals and remittances citing “extreme” conditions, in the latest sign of how financial market turmoil is wreaking havoc on the cryptosphere.
The move to freeze withdrawals at Celsius Network on Sunday sparked a fall in cryptocurrencies, which fell below $1 trillion on Monday for the first time since January last year, causing the largest bitcoin token to fall by 11 percent led.
Following the Celsius announcement, Bitcoin hit an 18-month low of $23,476. No.2 token Ether fell as much as 16% to $1,177.
On Monday, Binance, the world’s largest cryptocurrency exchange, also paused payouts, blaming “stuck transactions” that caused trades to backlog.
Binance CEO Changpeng Zhao said the withdrawal halt would last only half an hour, but the system was already down for an hour and a half by 10:30 a.m.
Bitcoin hit an 18-month low of $23,476. Token Ether #2 fell as much as 16% to $1,177, its lowest since January 2021
Experts say this is a landmark time for the digital phenomenon and advise against investing again during the current downturn
Cryptocurrencies have plummeted across the board amid news that US inflation is continuing to rise
Crypto markets have plummeted over the past few weeks as rising interest rates and rising inflation hurt riskier assets in the financial markets. The collapse of the terraUSD and Luna tokens in May also rocked the industry.
“It’s still an awkward moment and there’s some risk of contagion around crypto more broadly,” said Joseph Edwards, head of financial strategy at fund management company Solrise Finance.
Celsius offers interest-bearing products to clients who deposit cryptocurrencies on its platform, and then lends cryptocurrencies to earn a return.
In a blog post, the company said it had frozen withdrawals and inter-account transfers “to stabilize liquidity and operations while we take steps to preserve and protect assets.”
“We are taking this action today to better position Celsius to meet its take-back obligations over time,” the New Jersey-based company said.
Cryptocurrency markets are collapsing globally as people withdraw due to post-pandemic inflation and rising cost of living
Rising interest in crypto lending has raised concerns from regulators, particularly in the United States, over investor protection and systemic risk from unregulated lending products.
David Gerard, an author and crypto expert, said that a lack of regulation has doomed the industry. Anyone who started investing in crypto in the past six months has been sold “magic beans” instead.
“You can’t get rich for nothing. You’d think that’s obvious, but people still hope that there’s a way out and that they’ll get through, but it’s always false hope,” he said. “Some people make it great, but more people get absolutely ruined.”
Celsius and crypto firms that offer similar services to banks are in a “grey area” of regulations, said Matthew Nyman of law firm CMS. “They are not subject to clear regulations requiring disclosure” about their assets.
Celsius CEO Alex Mashinsky and Celsius did not immediately respond to Reuters requests for comment outside of US business hours.
Experts agree this is a dark time for the digital currency and have warned investors about the stock’s current slide – forecasting a price decline of up to another 50 percent.
“Bitcoin seems poised to crash to $20,000 and Ethereum to $1,000. In that case, the total market cap of nearly 20,000 digital tokens would fall below $800 billion, from nearly $3 trillion at its peak,” said Peter Schiff, Chief Economist & Global Strategist at Europac.
“Don’t buy this dip. You will lose a lot more money.”
Schiff told MailOnline that falling stock prices were a result of skyrocketing inflation and the cost of living after it was announced on Friday that US inflation had risen to 8.6 percent.
“With food and energy prices soaring, many Bitcoin HODLers will be forced to sell to cover costs. Grocery stores and gas stations do not accept bitcoins. When bitcoin crashed during covid, no one had to sell,” said the global economist, using the slang for bitcoin investor.
“Consumer prices were much lower and HODLers got stimulus checks. The need to sell bitcoin to pay the bills will only get worse as the recession deepens and many HODLers lose their jobs, particularly those working for soon-to-be-bankrupt blockchain companies.
“As circumstances change, long-term buyers will be forced to sell without a paycheck.”
HODLers is a crypto slang term that describes a strategy used by buy-and-hold traders, rather than people buying and selling on every dip.
It was a short honeymoon for Celsius.
The cryptocurrency lender raised $750 million from investors including Canada’s second-largest pension fund, Caisse de Dépôt et Placement du Québec, in late November. Celsius was valued at $3.25 billion at the time.
As of May 17, Celsius had $11.8 billion in assets, down more than half from October, according to its website, and had processed a total of $8.2 billion in loans.
Mashinsky, the CEO, was quoted as saying last October that Celsius had more than $25 billion in assets.
The company’s website, which urges customers to “earn big. Borrow low,” it says, offering interest rates as high as 18.6%.
Rival crypto lender Nexo said Monday it had offered to buy Celsius’ outstanding assets.
“We reached out to Celsius on Sunday morning to discuss the acquisition of its secured loan portfolio. So far, Celsius has chosen not to get involved,” said Nexo co-founder Antoni Trenchev.
Celsius did not immediately respond to a request for comment on Nexo’s offer.
Cryptocurrency investors face mental health battles as values plummet
It was one of the largest cryptocurrencies in the world, but after a coordinated attack on its systems, Terra Luna is now worthless.
The financial carnage has not only left millions in the pockets of thousands of keen investors, but also plunged many into dark mental health holes — some so bad they’ve even attempted suicide.
Others were forced to hide in their homes while their friends angrily tried to confront them, knocking on their doors demanding answers and vengeance.
On the TerraLuna sub-Reddit, the main discussion space for the self-proclaimed “LUNAtics,” a terrified investor asked for advice today.
“My friends to whom I recommended Luna all hate me now,” they wrote.
“Lots of angry calls and loud knocks on my door from former friends telling me to buy Luna sooner, I feel like we’ve all lost our life savings and they have kids. What can I do?’
Terra Luna, which was once among the top few cryptocurrencies in the world, faltered on May 8 as many investors cut losses and sold their coins.
Similar to a bank run, the sell-off triggered a death spiral that rendered the cryptocurrency worthless.
TerraUSD, a stablecoin system, has always been pegged to the US dollar to provide stability and security for investors.
The sudden collapse of Terra and Luna, which wiped out billions in value, not only angered investors, but also left many contemplating suicide.
“I’ve lost over $450,000, I can’t pay the bank. I will lose my home soon. i will be homeless Suicide is the only way out for me,” one wrote.
“I’m going through some of the darkest and most severe emotional pain of my life. It still doesn’t seem real that I lost $180,000… If I get through this I will be stronger than ever,” added another.
“Bro my little brother lost his entire fortune of £350,000 so gone. I loaned him 5,000 and he moved in with me,” wrote a third.
In another post-crash story, an investor asked people to seek mental health support after her own boyfriend attempted suicide.
“My friend and ex-colleague (my manager for 15 years) tried to commit suicide this morning. He basically moved all of his savings into crypto in 2021 and LUNA was a key player in his portfolio,” they wrote.
“I just wanted to tell you – when you’re in pain and you think your life is miserable without money, you feel failed and stuff like that…just get to the people you love.
“Don’t be alone, this shit is getting serious. Do not overestimate the value of money, life has a much higher value. I don’t post on Reddit at all, but I felt it was important to do so now. Wish you good luck.’
A third shared his own story of surviving a suicide attempt years ago to discourage other Luna investors from following the same path.
“If you’re thinking about ending your life, I sincerely hope you’ll reconsider your feelings,” they wrote.
“Whatever you’re going through, like everything else in life that has ever been, will pass. A brighter day will come and you will be surprised how life will open its doors to you again if you let it.’