What is Celsius Network in the cryptocurrency market and why has it paused withdrawals?
The cryptocurrency bank halted all withdrawals, transfers and swaps earlier this week, blaming “extreme market conditions” for suspending the service.
A UK-based cryptocurrency bank, Celsius Network, was forced to temporarily halt all withdrawals, transfers and crypto swaps due to what the company described as “extreme market conditions.”
Celsius has 1.7 million customers and around $3.7 billion in assets but is suffering from a decline in confidence in cryptocurrency which has been seen right across the industry in recent weeks.
In a blog post explaining the decision, the company said: “We are taking this necessary action for the benefit of our entire community in order to stabilize liquidity and operations while we take steps to preserve and protect assets.”
The bank had gathered a substantial number of fans because it pays interest on cryptocurrency deposits, theoretically making it a safer bet for investors. However the temporarily block on withdrawals and transfers will have likely spooked investors and could threaten its long-term viability.
Why did Celsius Network pause withdrawals and transfers?
The company’s description of “extreme market conditions” was fairly vague, but it is easy to see where the concern over the crypto markets comes from. Earlier this year the so-called stablecoin TerraUSD collapsed, leaving millions of investors with a currency that was briefly worth $0.
Bitcoin, the largest and most influential cryptocurrency, fell by around 14% over the weekend to take its value below $23,000. This is a 67% fall on its all-time high recorded just last November. The total value of the cryptocurrency market has also been in decline, falling below $1 trillion for the first time since January 2021.
Celsius describes itself as a “platform of curated services that have been abandoned by big banks—things like fair yield, zero fees, and lightning-quick transactions.” With this in mind, maintaining a steady service will be one of their top priorities; showing how significant a moment the pause was.
Cryptocurrencies struggle after pandemic gains
For much of the pandemic the value of cryptocurrency was on the up, fuelled in part by the introduction of small-scale ‘home investors’ to the market. In the US, this was aided by the distribution of three rounds of stimulus checks, which gave a lump sum of cash to people who were largely forced to stay at home.
With fresh capital pouring into the crypto markets the value of coins went up significantly but in 2022, with society and the economy getting back to normal, crypto coins are suffering.
Along with the decline of Bitcoin, Ether, the second-most-valuable coin, has lost around 75% of its value since last November. The world’s largest cryptocurrency exchange, Binance, has had problems of its own and was forced to suspend withdrawals for a few hours on Monday.
In a statement the company said: “Binance team is working on a long-term solution to accelerate pending transactions on the bitcoin (BTC) network and prevent similar situations in the future.”