Celsius Network Ltd. stopped withdrawals, swaps, and transfers on its platform. This led to a wider market selloff as traders continued to question the value of high-yielding tokens after the Terra blockchain failed.
As of 12:42 p.m. in Hong Kong, the CEL token was down 31% to 24.2 cents, according to the price data site CoinGecko. This was a bad performance for Celsius amid a drop in crypto assets that sent Bitcoin to its lowest level since December 2020.
Concerns about the sky-high yields on protocols like Celsius have grown since Terra’s collapse in May and as tighter monetary policy from central banks around the world reduces demand for riskier assets. On its website, the CEL token promises “real financial rewards,” such as up to 30 percent more returns every week.
Burak Tamac, a senior regulatory and on-chain analyst at CryptoQuant, said, “The drop of Celsius’s token $CEL seems to be a realisation of the risk of UST/LUNA spreading to similar financial tools.”
According to CoinGecko, the market caps of protocols for lending and borrowing did not do as well as the rest of the crypto market, which fell by 6.4%. Aave, Maple, and Compound, which are similar to Celsius, all went down by 7,5%, 14%, and 9%, respectively.
In a note on its website, the platform said, “We are taking this action today to make it easier for Celsius to meet its withdrawal obligations over time.” During the pause, users will still be able to earn rewards.
The moves by Celsius come at a time when cryptocurrencies are having trouble in general. Monday, Bitcoin dropped as much as 8.9%, while Ether fell as much as 12%. Both are getting worse for the seventh session in a row.