Cryptocurrencies tumbled afresh on Tuesday, with bitcoin and ether falling to new 18-month lows after major cryptocurrency lending company Celsius Network’s freezing of withdrawals delivered the latest jolt to investors in the asset class.
Bitcoin fell as much as 7.2% to $20,816 its lowest since Dec. 2020, extending Monday’s 15% plunge.
The world’s largest cryptocurrency is down over 50% year to date and 28% since Friday.
No. 2 token ether lost as much as 10% to $1,075, its lowest since January 2021, and smaller tokens have taken even more of a battering.
The sell-off resulted from Celsius' suspension of withdrawals and Friday's high U.S. inflation data driving expectations of sharper interest rate rises from the Federal Reserve (Fed), said Singapore-based fund manager QCP Capital in a note.
“The market is now panicking about the impact and contagion if Celsius becomes insolvent,” QCP said.
Celsius said in a blog post published in Asia hours on Monday citing extreme market conditions that it had frozen withdrawals and transfers between accounts, “to stabilize liquidity and operations while we take steps to preserve and protect assets.”
New Jersey-based Celsius, which has around $11.8 billion in assets, offers interest-bearing products to customers who deposit cryptocurrencies with its platform. It then lends out cryptocurrencies to earn a return.
Asset classes across the board have also been shaken by higher inflation as investors dumped risky assets.
The S&P index has fallen for four straight days, with the benchmark now down more than 20% from its most recent record closing high to confirm a bear market according to a commonly used definition.
Cryptocurrency stocks have been particularly hard hit.
Crypto bank Silvergate Capital shares closed down 16.7% on Monday, BTC buyer and business intelligence software provider MicroStrategy tumbled 25.2%, and crypto exchange Coinbase Global lost 11.4%.
