In the latest indicator of the financial sector crisis affecting the crypto sphere, Bitcoin plunged 14% on Monday when major U.S. cryptocurrency financing company Celsius Network suspended transactions and transfers, citing an “extreme” market situation.
The action by Celsius caused a sell-off in cryptocurrencies, with their price falling below $1 trillion for the first time since January 2021 on Monday, raising concerns that the sell-off could spread to other assets or firms.
Because the entire industry is over-levered, almost anything may be systemic in crypto, according to Cory Klippsten, CEO of Swan Bitcoin.
Celsius CEO Alex Mashinsky and the company as a whole did not reply to calls for comment from Reuters.
Celsius, situated in New Jersey, has roughly $11.8 billion in assets and offers consumers who deposit cryptocurrency with its interest-bearing system products. It then earns money by lending out cryptocurrencies.
Following Celsius’s news, bitcoin fell to an eighteen-month low of $22,725 until marginally rebounding to roughly $23,265. The second-largest token, ether, fell by 18% to $1,176, the lowest point since January 2021.
Companies with a cryptocurrency exposure have previously cautioned that falling token values could have unintended consequences, such as triggering margin calls.
In recent weeks, crypto markets have plummeted as rising inflation and interest rates led investors to flee risky investments across financial markets.
Investors increased their bet on Federal Reserve rate hikes after U.S. inflation statistics on Friday showed the highest increase in price since 1981, pushing markets to prolong their sell-off on Monday.
According to Jay Hatfield, a chief investment officer of Infrastructure Capital Management, this was most certainly the driving force behind the crypto market’s decline.
According to ndtv.com, The fall of the Terra USD and luna tokens in May, led by Tether, the world’s biggest stablecoin, briefly losing its 1:1 peg with the dollar, has spooked crypto investors.