12 votes

Celsius crypto bank freezes withdrawals; bitcoin, etherium plunge

Posted by skybrian
Tags: cryptocurrency, celsius, bitcoin, etherium, banks, author.steven zeitchik, source.the washington post, paywall
https://www.washingtonpost.com/business/2022/06/13/celsius-crypto-bank-withdrawals-freeze/

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Title
Major cryptocurrency bank Celsius freezes withdrawals, chilling market
Published
Jun 13 2022
Word count
646 words

7 comments

  1. [2]
    Bullmaestro
    Link
    Somebody on the /r/cryptocurrency subreddit called it twelve days ago. He got ridiculed by the entire subreddit...

    Somebody on the /r/cryptocurrency subreddit called it twelve days ago. He got ridiculed by the entire subreddit...

    9 votes
    1. Fiachra
      Link Parent
      On the other extreme, I'm praying for this person who had 1111.93 ETH, worth over $1.3million, with Celsius. Hoping they got their money out before they lost everything.

      On the other extreme, I'm praying for this person who had 1111.93 ETH, worth over $1.3million, with Celsius. Hoping they got their money out before they lost everything.

      2 votes
  2. [2]
    skybrian
    Link
    From the article: [...] [...] [...]

    From the article:

    A decision by embattled cryptocurrency bank Celsius to halt withdrawals by its nearly 2 million users rattled crypto markets Monday and underscored fears that some of the sector’s largest companies are on shaky financial ground.

    [...]

    In layman’s terms, this means that people who deposited money with Celsius to reap its famously high returns can’t, for the time being, get it out. The company says it has 1.7 million users and is believed to be holding about $8 billion in deposits, which are now frozen.

    [...]

    The news caused the largest cryptocurrencies to plunge — bitcoin dropped 12 percent as of late Monday afternoon and ethereum plunged 13 percent. There is a feedback loop of sorts here; it was a drop of more than 10 percent for each currency in the days before the announcement that probably contributed to Celsius’s liquidity issues in the first place.

    Overall, Bitcoin is down 23 percent in the last five days while Etherium has plummeted 30 percent during that time; both now sit at their lowest prices in nearly 18 months. Celsius’s own coin, meanwhile, has dropped from a high of $7 last year to 21 cents.

    [...]

    Celsius in the past has borrowed as much as $1 billion from Tether, the “stablecoin” pegged to the dollar, to assure its liquidity. Tether has itself generated questions about whether it has sufficient asset backing.

    And it was trades by Celsius that some experts believe caused the crash last month of Terra’s stablecoin, which in turn fueled a larger crypto plunge that has roiled so much of the market including Celsius.

    4 votes
    1. skybrian
      Link Parent
      A bit of Matt Levine's commentary:

      A bit of Matt Levine's commentary:

      Tether, like Celsius, is roughly speaking a crypto bank: It is a stablecoin project that takes people’s dollars and invests them in dollar-denominated assets. Unlike a regular bank, Tether has no capital requirements: Its assets (commercial paper, etc.) more or less exactly match its liabilities (stablecoins issued), and if the assets lose a bit of value then the loss will fall on its depositors. Tether's latest reserves report, as of March 31, 2022, states that its “consolidated total assets amount to at least US$82,424,821,101,” while its “consolidated total liabilities amount to US$82,262,430,079, of which US$82,188,190,8131 relates to digital tokens issued.” That represents equity capital of about $162.4 million on a balance sheet of $82 billion, or a capital ratio of about 0.20%. Banks have risk-weighted capital requirements of at least 8%. Banks also publish audited financial statements and have prudential requirements limiting what they can do with their money; Tether does not. If, say, one $500 million loan to Celsius — or one similar-sized margin loan to some other crypto firm during a crypto market meltdown — went bad, Tether’s entire capital would be vaporized and its stablecoin would be undercollateralized.

      3 votes
  5. babypuncher
    Link
    Well that was an amusing read. Thanks for brightening my day!

    Well that was an amusing read. Thanks for brightening my day!

    1 vote