Several cryptocurrency platforms may run out of money

Several cryptocurrency platforms may run out of money

The world of cryptocurrencies is in the red. Since the fall of the UST, prices have collapsed. Several firms in the ecosystem are said to be close to insolvency. This is particularly the case of Celsius, which preferred to suspend withdrawals.

Credits: Unsplash

At the beginning of May 2022, an earthquake shook the cryptocurrency market. L’USTTerra’s algorithmic stablecoin, has lost its parity with the dollar. This event caused the collapse of the Luna and all the digital currencies in the market. King Bitcoin crashed below $25,000, raising the threat of a long-running bear market. The crash also weighed on the non-fungible token (NFT) sector.

Many platforms specializing in cryptocurrencies have lost considerable sums in the fall of the UST. Celsius, an application for earning interest on held cryptocurrencies, is facing a liquidity crisis. In the event of a mass withdrawal, Celsius would not be able to reimburse all of its users. Moreover, an analysis of the blockchain suggests that Celsius is based on a host of different borrowings.

Celsius blocks pullbacks to stay afloat

Confirming the fears of market watchers, the platform announced that it would stop withdrawals and transfers. In a press release, the firm, which has 1.7 million customers, points the finger “extreme market conditions” and ensures to do everything to find each other “in a better position to meet, over time, its withdrawal obligations”.

Celsius claims to be reacting to the recent fall in the crypto-asset market. Over the weekend, most cryptos lost a significant portion of their value. The whole market is in the red, which has created a wave of panic among investors. “We are taking these necessary steps for the benefit of our entire community to stabilize liquidity and operations while we take steps to preserve and protect assets”emphasizes Celsius.

Other crypto services might also encounter a liquidity crisis similar. Market watchers fear that another token could suffer the same fate as the UST, the lido staked eth (stETH). It is a cryptocurrency designed to hold the same value as Ether (ETH). However, it broke away from Ether a few weeks ago.

On the same subject: Crypto is accused of being a danger to payment systems

Several firms have stETH as cash, such as Celsius or Swissborg. If these two groups close their position on the token, massive losses are to be expected. Other flagship companies in the sector would also be in trouble in the event of a crash. For Coinbase, the famous crypto exchange, the fall of the token represents “significant liquidity, yield and credit risks” for the world of decentralized finance.

Leave a Comment

Your email address will not be published.