Celsius Network announced it had implemented a pause on withdrawals, swaps, and transfers between accounts in a notice sent Monday morning (GMT). The firm attributed the issue to “extreme market conditions.”
Following the U.S. Labor Department’s release of CPI inflation data last Friday, crypto markets have been in freefall. Market cap outflows since then totaled $213 billion from peak to trough.
U.S. consumer inflation hit a 40-year high of 8.6% in May, up 0.3% from the previous month, which indicates that inflation and the associated cost of living crisis are not under control.
The notice from Celsius is a further sign of macroeconomic conditions adding pressure to an already strained cryptocurrency sector.
Celsius takes action to stabilize its operations
In response to the pressures, Celsius said the move would put it in a better position to honor its obligations in the long term.
The firm added that it was necessary to “stabilize liquidity and operations.” However, the notice confirmed that rewards would continue to accrue during the pause period.
The event triggered a 74% swing to the downside for the CEL token. Support arrived at the $0.0930 level, setting off an initial fight back from bulls.
But most proceeding hourly candles since then indicate indecision.
In response, Guy from Coin Bureau referred to “the Celsius bank run” and considered whether the firm would sell assets to improve its liquidity position in the coming days.
Yikes. What a start to the week ?. Seems that the Celsius bank run has left them short of liquidity. Wonder if this means they will be selling more of their assets in the next few days?!
— Coin Bureau (guy.eth) (@coinbureau) June 13, 2022
According to @WatcherGuru, Celsius sent $320 million worth of crypto to FTX before issuing the pause notice.
JUST IN: Celsius reportedly transferred $320,000,000 worth of #crypto to FTX, before announcing they would halt all trading and withdrawals on the platform.
— Watcher.Guru (@WatcherGuru) June 13, 2022
In May, some Celsius users reported difficulties in withdrawing funds, which set off rumors that the firm was insolvent.
Commenting on this in a statement sent to CryptoSlate on June 3, Celsius said it does not have issues meeting withdrawal requests and honors them as quickly as possible. Any withdrawal delays experienced were due to problems outside of its control. The company works with affected customers to resolve the issue in these cases.
The Celsius spokeswoman said in the email that the firm is sufficiently liquid:
“We can confirm that Celsius has the right reserves and that the company’s strong liquidity framework, established practices around liquidity data, and modeling are similar to those employed by large financial institutions.”