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Celsius Withdrawal Halt Shows Run Risks at Other Crypto Banks
Celsius announced on Sunday evening that it would suspend withdrawals, exchanges and transfers between accounts on its platform due to “extreme market conditions.” Industry representatives are calling the situation a run, and it may happen to others in the space As cryptocurrencies and related stocks continue to fall, industry participants are wondering how the collapse of crypto lending platform Celsius could affect digital asset markets elsewhere. “Certainly we were able to detect contagion,” said Rasheed Saleuddin, head of research at Blockworks. “Transparency is the key to shadow banking markets.” Celsius, sometimes called a quasi-bank because it straddles the line between decentralized and centralized finance, said on Sunday it would allow withdrawals, exchanges...
Celsius Withdrawal Halt Shows Run Risks at Other Crypto Banks
- Celsius kündigte am Sonntagabend an, Abhebungen, Tauschvorgänge und Überweisungen zwischen Konten auf seiner Plattform aufgrund „extremer Marktbedingungen“ auszusetzen.
- Branchenvertreter nennen die Situation einen Lauf, und es kann anderen im Raum passieren
As cryptocurrencies and related stocks continue to fall, industry participants are wondering how the collapse of crypto lending platform Celsius could affect digital asset markets elsewhere.
“Certainly we were able to detect contagion,” said Rasheed Saleuddin, head of research at Blockworks. “Transparency is the key to shadow banking markets.”
Celsius, sometimes called a quasi-bank because it straddles the line between decentralized and centralized finance, said on Sunday it would pause withdrawals, exchanges and transfers between accounts on its platform due to "extreme market conditions."
“We are taking this action today to better enable Celsius to meet its withdrawal obligations over time,” the company wrote in a Blog entry.
The company said its decision to pause payouts was essential to “stabilize liquidity and operations.”
On Monday morning, crypto exchange Binance paused Bitcoin withdrawals for about three hours as markets continued to bounce off Celsius. According to a, Binance attributed the suspension to “minor hardware errors” that resulted in a backlog of transactions tweet.
“We have seen a lot of transactions and are nowhere near as big as Binance,” said Chris Kline, chief operating officer and co-founder of Bitcoin IRA. "We've got a few billion dollars - they've gotten close to a trillion, but you can imagine what's happening, the technology is really being pushed to the limit and it's a stress test for your system."
Runs can stress any financial system, Kline added.
“Just like if this happened with stocks, there would be houses like Fidelity, TD Ameritrade, etc. that would have problems with too many people in the system,” Kline said. “Too many people doing something creates a backlog.”
What's happening with Celsius and what happened with Terra's UST in May are runs, Saleuddin said, and there's no telling what other companies might be affected.
"Is BlockFi in danger? Nexo? It depends on how liquid they are," Saleuddin said.
Quasi-bank colleague Tether tried to distance itself from Celsius in one Blog entry Monday.
“Although Tether’s investment portfolio includes an investment in the company that represents a minimal portion of our equity, there is no correlation between this investment and our own reserves or stability,” the lending platform said.
Because disclosures are vague, it is impossible to know exactly how risky Tether's assets are, Saleuddin said.
“But we know that they hold tokens, precious metals and a decent amount of low-grade commercial paper and are exposed to Celsius,” Saleuddin said. "What would it take for a run on Tether? The truth is we don't know."
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The post “Celsius Withdrawal Halt Reveal Run Risks on Other Crypto Banks” is not financial advice.