Cryptocurrencies crash to below $1 trillion, Bitcoin down 11%: Here's why

FILE PHOTO: Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, (REUTERS) — FILE PHOTO: Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, **(REUTERS)**

2 min read . Updated: 13 Jun 2022, 06:20 PM IST Livemint

After Celsius's announcement, Bitcoin touched an 18-month low of $23,476. No.2 token ether dropped as much as 16% to $1,177, its lowest since January 2021.

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After Cryptocurrency lending firm Celsius Network announced pausing of all its withdrawals and transfers between accounts due to "extreme market conditions", Bitcoin tumbled by 11% and dragged down cryptocurrencies below $1 trillion market value, first time since January last year. The crash is being seen as the latest sign of financial market turbulence is causing distress in the cryptosphere.

After Celsius's announcement, Bitcoin touched an 18-month low of $23,476. No.2 token Ether dropped as much as 16% to $1,177, its lowest since January 2021. Crypto markets have dived in the past few weeks as rising interest rates and surging inflation hurt riskier assets across financial markets. Earlier in May collapse of the Terra and Luna tokens also shook the industry

Celsius’s CEL token sank 53% to 18 cents, pacing a slump in crypto assets that sent Bitcoin to its lowest level since December 2020.

Doubts about the sky-high yields backing protocols such as Celsius have intensified after Terra’s collapse in May and as tighter monetary policy from global central banks curbs demand for riskier assets. The CEL token promises “actual financial rewards," including as much as 30% extra returns weekly, according to its website.

Celsius Network, which raised $750 million in funding late last year, is a significant player in crypto lending. It offers interest-bearing products to customers who deposit their cryptocurrencies with the company, and lends out cryptocurrencies to earn a return.

Price falls have also both been caused by and contributed to the collapse of some crypto projects, most notably the collapse of stable coin TerraUSD. TerraUSD last month broke its dollar peg and collapsed in value, rocking the crypto industry.

The company's website, which urges customers to "Earn high. Borrow low," said it offers interest rates of up to 18.6%. Rival crypto lender Nexo said on Monday it had offered to buy Celsius' outstanding assets. "We reached out to Celsius Sunday morning to discuss the acquisition of its collateralised loan portfolio. So far, Celsius has chosen not to engage," said Nexo co-founder Antoni Trenchev.