The sell-off in the cryptocurrency market on Monday was driven not by Celsius Network’s announcement that withdrawals had been paused, but by the broader negative macroeconomic backdrop. Industry participants told The Block.
On June 13, the crypto-lending platform paused withdrawals, exchanges and transfers between accounts “due to extreme market conditions.” As of May, Celsius managed user assets worth $11 billion.
Against this backdrop, Bitcoin price fell below $23,000, Ethereum traded below $1,200. The market capitalization of cryptocurrencies fell to less than $1 trillion.
One trader told the publication that the crypto markets ‘would have fallen regardless of Celsius because of macroeconomics’.
Bloomberg on Monday noted that the market had entered a ‘period of selling everything except the dollar.’ Traders are moving into ‘safe havens’ amid fears that the U.S. Federal Reserve could raise rates more aggressively to combat inflation than expected.
Barclays and Jefferies lifted their forecasts to 75 basis points. Some Wall Street analysts reckon the rate will rise by a full percentage point at once. Such a result could have negative consequences for high-risk assets like cryptocurrencies. The Fed had previously signalled that rate hikes would total 50 basis points each in June and July.
“Our clients are far more concerned about macroeconomic indicators than Celsius. The market is simply very ‘jittery’, and the macro backdrop is terrible,” said Aya Kantorovich, a FalconX representative to The Block.
The CDPQ pension fund, which invested in Celsius, drew attention to the difficult market environment. The firm said that amid a broad downturn, investors are reducing risk across all asset classes.
“In this context, Celsius has been affected by very difficult markets in recent weeks, notably a large outflow of client withdrawals,” CDPQ said.
Earlier, rival service Nexo said it was prepared to buy Celsius’s loan portfolio.