Crypto Fear Contagion Grows After Celsius Network “Pause”
- The measures taken by U.S. crypto exchange Celsius plunged the price of Bitcoin into a 14% deficit on Monday, June 13th, deepening the market dip.
- Binance’s unfortunately timed announcement, which saw the exchange also temporarily suspend Bitcoin withdrawals, further fueled the prevailing fears in the crypto space.
- Companies with exposure to cryptocurrencies are taking note of the situation and making adjustments to their budgets.
Following the announcement by Celsius Network, an American crypto lending platform based in New Jersey, that it would be freezing operations, the price of Bitcoin sank 14% on Monday, June 13th. Now, on Tuesday 14th (07:05 am. GMT-4), the leading crypto asset has barely managed to reduce its losses to 6.76% over the last 24 hours, trading at $22,393.61 at press time.
The Celsius liquidity crisis intensified an already prevailant sell-off, deepening the decline of other assets, such as the price of BTC. The events ignited greater concerns in the market of a possible crisis that could spread like wildfire to other assets in the crypto space.
Following the Celsius decision, the cryptocurrency market cap fell below $1 trillion on Monday, representing a significant setback since reaching $3 trillion in November last year. Likewise, year-to-date the value of the Celsius token has fallen by approximately 97%, down from $7 USD to, $0.20, according to data from CoinGecko.
To date, Celsius’ management has issued no comment on the measures being undertaken by the company. To justify the pause in withdrawals, the crypto exchange cited a need to “stabilize liquidity and operations” in order “to put Celsius in a better position to honor, over time, its withdrawal obligations.”
Is a Domino Effect Being Cast Over the Market?
Cory Klippsten, chief executive of Bitcoin savings platform Swan Bitcoin, told Reuters: “Almost anything can be systemic in crypto […] because the whole space is over-levered,” he later added that “it’s all a house of cards.”
The move by Celsius, which holds some $11.8 billion in assets, was followed by Binance’s announcement on Tuesday to temporarily suspend Bitcoin withdrawals due to “stuck on-chain transactions,” further fuelling market fears.
Market analysts and companies with exposure to crypto assets have already warned that the current crisis, which affects the crypto market at large, could have a severe domino effect.
In this regard, Joseph Edwards, Head of Financial Strategy at Solrise Finance, a fund management company, maintains that "it’s still an uncomfortable moment, and there’s some contagion risk around crypto more broadly."
On the Flipside
- Nothing suggests that the price of Bitcoin or other cryptocurrencies has bottomed out. The accumulated losses of the top 20 cryptocurrencies in the last seven days range from 11% to 31%.
- Meanwhile, the alarm over what may happen in the coming weeks, and fears of the spreading crisis continue. The latest economic indicators, paired with the outlook for inflation in the U.S, are significant contributors to the frenzy.
As investors lose their appetites for risky assets, the crypto market has been left to face down a drawn out downtrend. Market analysts emphasise that interest rates will continue to rise this year, so the bet on cryptocurrencies is uncertain in the short term.
Infrastructure Capital Management Chief Investment Officer Jay Hatfield said on Monday that “The Fed’s overexpansion of its balance sheet led to a number of bubbles including tech stocks, (and) crypto tokens.”
Companies with exposure to cryptocurrencies are taking note of this and adjusting their budgets. Crypto financial services platform BlockFi announced the reduction of some 400 jobs (around 20% of its workforce), due to the “dramatic shift in macroeconomic conditions”.
Tether Limited, the company behind the world’s largest stablecoin (USDT), said on its blog this week that, despite having investments in Celsius, its operations on the platform have always been “overcollateralized”, so the movement of the company will not impact Tether’s reserves.
Read more: https://dailycoin.com/crypto-fear-contagion-grows-after-celsius-network-pause/
Text source: DailyCoin.com
