Bitcoin withdrawals temporarily suspended in volatile day for crypto market

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The cryptocurrency market has endured another day of volatility as the Binance exchange temporarily suspended bitcoin withdrawals and the total value of the digital asset market dipped below $1tn (£820bn), after a cryptocurrency lender stopped customers from taking back their funds.

The cryptocurrency lending platform Celsius Network halted withdrawals because of “extreme market conditions”, prompting a selloff.

Bitcoin dropped to a 17-month low of $23,629 after the Celsius announcement, while ether, the world’s second-largest cryptocurrency after bitcoin, dropped more than 15% to $1,237, its lowest since January 2021. Meanwhile, Binance announced it had “temporarily paused” bitcoin withdrawals owing to a “stuck on-chain transaction”, before announcing a resumption several hours later.

The total value of the cryptocurrency market fell below $1tn after the sell-off, according to the data site CoinMarketCap, which had valued the market at almost $3tn in November.

Celsius said in a blog it was “pausing” all withdrawals and transfers between accounts for its 1.7 million customers. The company offers customers high interest rates – as much as 18% – on their cryptocurrency deposits and pays the interest in crypto assets, which includes its own token, called CEL.

“Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, swap, and transfers between accounts,” the platform said. “We are taking this action today to put Celsius in a better position to honour, over time, its withdrawal obligations.”

Binance said in a statement that bitcoin withdrawals had been suspended shortly after midday in the UK “due to an earlier batch of transactions getting stuck from low transaction fees submitted”. As a consequence there had been a backlog of bitcoin network withdrawals, Binance said. It then announced at 4.30pm BST that withdrawals had resumed.

On 7 June, Celsius had published a blog seeking to reassure customers amid volatile conditions in the cryptocurrency markets, triggered initially by a collapse in the crypto project Terra. Headlined “Damn the torpedoes, full speed ahead”, the blog said the company had not had “any issues meeting withdrawal requests”. Celsius has offices in London, New York and Lithuania.

Celsius’s website tells customers they can “borrow like a billionaire”. It has $11.8bn in assets, down from more than $24bn in December last year. In November, it said it had raised $750m from investors including Caisse de dépôt et placement du Québec, one of Canada’s largest pension funds.

Like a bank, Celsius also has a retail loan operation, with customers able to borrow money, denominated in US dollars, from the service. Because of the impossibility of sending debt collectors after a crypto wallet, however, Celsius loans are “overcollateralised”: customers need to deposit bitcoin or ethereum worth at least twice the value of the money they are borrowing. That can be useful if, for instance, a bitcoin millionaire needs some hard cash to buy a house but does not want to liquidate their bitcoin holdings because they are gambling the coin will go up again.

However, unlike a bank, Celsius’s loans charge a lower interest rate than it pays on deposits. The company makes up the difference through an opaque investment strategy that has in the past included investing $300m in bitcoin mining, offering more traditional loans to unnamed “institutional investors” at higher rates of interest, and taking large stakes in other cryptocurrency projects.

Occasionally, that strategy has resulted in large losses: a hack of the decentralised investment platform BadgerDAO that wiped out that project was revealed to have cost Celsius $50m in bitcoin.

The company also had a close relationship with the defunct stablecoin project Terra, at one point investing $500m of funds in the Anchor Protocol, Terra’s own saving and lending service. Celsius also offers customers higher returns if they accept their interest payments in the project’s own crypto token, CEL, which was trading at $7 last year and has fallen to less than $0.20.

Cryptocurrencies have also been swept up in a market panic over rising inflation and higher interest rates, which has dulled the appetite for higher-risk assets.

“As inflation proves to be an even trickier opponent to beat than expected, bitcoin and ether are continuing to get a severe bruising in the ring,” said Susannah Streeter, a senior investment and markets analyst at the investment platform Hargreaves Lansdown.

“They are prime victims of the flight away from risky assets as investors fret about spiralling consumer prices around the world.”





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