Investors worry another possible crypto collapse will bring down other key players
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A liquidity crisis at cryptocurrency lending firm Celsius has investors worried about a broader contagion that could bring down other major players in the market.
Celsius recently moved to pause all account withdrawals, sparking fears that it may be about to go bust. The company lends out clients' funds similar to a bank — but without the strict insurance requirements imposed on traditional lenders.
Bitcoin sank below $21,000 on Tuesday, extending sharp declines from the previous day and sinking deeper into 18-month lows. The total value of all digital tokens combined also dipped below $1 trillion for the first time since early 2021, according to CoinMarketCap data.
Crypto investors fear the possible collapse of Celsius may lead to even more pain for a market that was already on shaky ground after the demise of $60 billion stablecoin venture Terra. Celsius was an investor in Terra, but says it had «minimal» exposure to the project.
Celsius did not return multiple CNBC requests for comment.
«In the medium term, everyone is really bracing for more downside,» said Mikkel Morch, executive director of crypto hedge fund ARK36.
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«Bear markets have a way of exposing previously hidden weaknesses and overleveraged projects so it is possible that we see events like last month's unwinding of the Terra ecosystem repeat.»
Monsur Hussain, senior director of financial
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