Celsius Goes Bankrupt in ‘Lehman Moment’ for Crypto Industry: Collapse of Digital Currency Lender Sends Bitcoin Price Below $20,000
One of the world’s largest cryptocurrency lenders has gone bankrupt, becoming the latest high-profile victim of the sell-off in digital currency markets.
Celsius’ collapse is a blow to the crypto industry and its reputation. In June, the company said it had more than a million users on its platform, most of whom are now at risk of being left behind.
His disappearance caused bitcoin prices to fall back below $20,000 as the sector continued to be plagued by a “crypto winter” that hit the industry.
Celsius’ bankruptcy is a blow to the crypto industry and its reputation. In June, the company said it had more than a million users on its platform, most of whom are now at risk of being left behind.
Celsius’ bankruptcy came about a month after the company froze withdrawals, trapping billions of dollars in customer accounts.
The beleaguered company built one of the leading crypto lending platforms by assuring potential customers that it was less risky than a bank.
But yesterday that reputation was shattered with the crisis dubbed in the crypto community as a “Lehman Brothers moment” for the sector as the company’s financial troubles set off a domino effect that saw other major crypto firms to fall.
Panic spread after a cryptocurrency called terra, a so-called “stablecoin” meant to maintain a constant value against the dollar, saw its value plummet after breaking its “peg” with the note. green.
In a filing in federal court in New York, Celsius listed between £847million and £8.5billion in assets, adding that it initially decided to restrict withdrawals to avoid a run on deposits that would have allowed some customers to be paid in full. while “leaving others behind”.
Despite having billions in assets, the company has revealed that it only has £141m at its disposal.
Celsius said the bankruptcy process was “the best opportunity to stabilize the business” and allow it to undertake restructuring.
“This is the right decision for our community and our business,” said chief executive Alex Mashinsky.
The crypto rush has been driven by ultra-low interest rates in recent years and central banks have used quantitative easing to flood the markets with cheap money.
Investors have also been lured by high-profile celebrities who have been paid to sell the currencies in online advertisements, including Snoop Dogg, Matt Damon and Gwyneth Paltrow.
But the sector was thrown into disarray earlier this year as fears over inflation, rising interest rates, the global recession and war in Ukraine sent investors fleeing high-risk assets, including digital currencies.
The rout caused the prices of major cryptos, including bitcoin and ethereum, to plummet. Bitcoin is down nearly 59% so far this year, while Ethereum is down 71%.
The sharp sell-off left lenders such as Celsius struggling with cash flow as customers rushed to withdraw funds, destabilizing balance sheets across the sector.