Celsius goes bust in ‘Lehman moment’ for crypto industry: Digital currency lender’s collapse sends Bitcoin price sliding below $20,000
One of the world’s largest cryptocurrency lenders has gone bankrupt, becoming the latest high-profile casualty 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 over 1m users on its platform, most of whom now risk being left out of pocket.
Its demise sent bitcoin prices once again sliding below $20,000 as the sector continued to be beset by a ‘crypto winter’ that has battered the industry.
Celsius’ bankruptcy is a blow to the crypto industry and its reputation. In June the company said it had over 1m users on its platform, most of whom now risk being left out of pocket
Celsius’ bankruptcy came around a month after the company froze withdrawals, which has trapped billions of dollars inside customer accounts.
The embattled company built one of the leading crypto lending platforms by assuring prospective customers it was less risky than a bank.
But yesterday that reputation was smashed to pieces 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 felled.
Panic spread after a crypto- currency called terra, a so-called ‘stablecoin’ that was meant to maintain a consistent value against the dollar, saw its value crash after breaking its ‘peg’ with the greenback.
In a filing submitted to a federal court in New York, Celsius listed between £847million and £8.5billion in assets, adding that it had initially decided to restrict withdrawals to prevent a run on deposits which would have allowed some customers to be paid in full while ‘leaving others behind’.
Despite having billions in assets, the firm revealed it only had £141million cash on hand.
Celsius announced the bankruptcy process was ‘the best opportunity to stabilise the business’ and allow it to undertake restructuring.
‘This is the right decision for our community and company,’ said chief executive Alex Mashinsky.
The rush into crypto was driven by ultra-low interest rates over recent years and central banks using quantitative easing to flood the markets with cheap money.
Investors were also taken in by high-profile celebrities who were paid to sell the currencies in online adverts – including Snoop Dogg, Matt Damon and Gwyneth Paltrow.
But the sector was thrown into disarray earlier this year as fears about inflation, higher interest rates, global recession and the war in Ukraine sent investors fleeing from high-risk assets including digital currencies.
The rout caused the prices of major cryptos including bitcoin and ethereum to plunge in value. Bitcoin is down nearly 59 per cent so far this year while ethereum has declined by 71 per cent.
The sharp sell-off left lenders such as Celsius facing cash crunches as customers scrambled to withdraw their funds, destabilising balance sheets across the industry.