Crypto lender Celsius has warned its clients a tweet on Friday they should add cryptocurrencies to their accounts in case the lender needs additional collateral from borrowers.
In Friday’s tweet, the lender said clients should be prepared for margin calls due to “market conditions.”
Crypto loans are popular among holders who want to raise cash without selling their coins and market makers who want to fill orders quickly. The phenomenon could potentially improve liquidity and price discovery for crypto assets, but it has also introduced systemic risks.
On Sunday, Nexo, another crypto lender, sent an email to clients titled “Protecting Your Assets Through Current Market Volatility,” in which the lender encourages its clients to set up “adequate notifications for them. price fluctuations and potential margin calls to avoid liquidation. of your assets. “
“Yes, we’ve made a few margin calls, but nothing dramatic at this point,” said Nexo co-founder and managing partner Antoni Trenchev.
Meanwhile, crypto lender Unchained Capital adjusted its maximum loan to value to 40% in February in response to the crypto price increase at the start of the year. The new LTV is intended to “help protect clients from margin call scenarios,” said Joseph Kelly, CEO of Unchained Capital.
At crypto lender BlockFi, CEO Zac Prince noted that his company’s BTC, ETH, and LTC loans hit a maximum LTV of 50%.
“I think others may fund coins lower in the market cap stack at higher initial LTVs, which may create a higher risk environment for their clients now,” Prince said.
Matthew Ballensweig, director of loans at Genesis, a crypto lender owned by CoinDesk’s parent company, Digital Currency Group, said all of Genesis customers have satisfied their margin calls or matched their loan balances.
“In the most recent sale, we see some trading companies taking short-term profits and repaying USD loans until the spread narrows again,” Ballensweig said. “Others continue to hold USD loan balances and deposit additional BTC collateral to maintain their position.”
The warnings come as cryptocurrencies are almost universally in the red, a drop attributable to US President Joe Biden’s proposed increase in capital gains tax.
Update (April 23, 17:53 UTC): Added comments from executives of Nexo, Unchained Capital, BlockFi and Genesis.