Celsius' Withdrawal Pause Rattles Crypto World

investopedia.com:

Crypto lending platform, Celsius, announced Monday that it had paused all «withdrawals, Swap, and transfers between accounts,» blaming the move on «extreme market conditions.»

Defining 'extreme market conditions' isn't difficult—there are multiple worthy candidates. These include the recent collapse of the TerraUSD stablecoin and a 40-year-high monthly inflation rate of 8.6% announced last Friday. The Celsius move triggered a slide across cryptocurrencies, with total crypto value dropping below $1 trillion for the first time since January 2021. Bitcoin, the largest token by market cap experienced a 14% tumble over the weekend to below $23,000.

On its website, Celsius self-describes its mission as one of providing a «platform of curated services that have been abandoned by big banks—things like fair yield, zero fees, and lightning-quick transactions.» In other words, crypto lender Celsius is a bank. Specifically, it is a decentralized or De-Fi bank.

Celsius lends and borrows crypto similar to what a traditional bank does with dollars, but without much of the infrastructure of a traditional financial institution. The platform offers very high returns on crypto deposits, up to 18.6% before the pause. This has led some critics to suggest Celsius and others like it don't have sufficient assets to back up deposits if there were a run by investors to withdraw funds.

The pause in withdrawals, Swaps, and transfers—which was a reaction to volatility in the crypto space—has resulted in more volatility as the company's in-house Cel token dropped 70% within an hour of the announcement.

Considering that the pause means that investors with money deposited with Celsius can't get their money out, the precipitous drop is not surprising,