Celsius Network, a crypto lending and lending platform in which Caisse de Depot has a significant investment, has announced a freeze on withdrawals and transfers for its 1.7 million clients.
The company cited “harsh conditions” in the cryptocurrency market, which have been shaken in recent weeks, to justify its decision, in a blog post published on Sunday. “We are taking this decision to put the CPC in a better position to meet its long-term commitments.”
The ruling evokes the “modern equivalent” of a bank influx when financial institutions were forced to close due to information or rumors of insufficient liquidity, ESG-UQAM finance professor Alexander F. believes. Roche. It sends the wrong message to investors, and even to customers. Roche believes that Celsius network customers may lose a lot of money due to the company’s difficulties and the cryptocurrency disaster. “Once that happens, it’s hard to put the toothpaste back into the tube. It’s hard to rebuild that confidence.”
The question about the future of Celsius Network is still open, but cryptocurrency specialist Louis Roy believes that the model of a company offering loans by taking cryptocurrency as collateral is still appropriate. “I think it has been here for a long time,” said the president of Catallaxy, a subsidiary of Raymond Chabot Grant Thornton, a blockchain company.
For his part, Mr. Roach finds it difficult to comment on the long-term viability of this business model. While he acknowledges that there may be interest in this service, he notes that cryptocurrencies “have no intrinsic value. They come from nothing. If the price of Bitcoin collapses, there is nothing behind that guarantee.”
Celsius Network’s freeze contrasts with the confidence its management team demonstrated shortly before Sunday’s announcement. On Saturday, the company’s senior head, Alex Mashinsky, accused his critics of misinformation. “Do you know anyone who has had trouble withdrawing their percentage money? Why share fear and misinformation? He wrote on Twitter A day before the transfer is frozen.
In addition to full customers, the decision represents a setback for Caisse de Depot et placement du Québec, which invested 150 million in the platform last October.
At Caisse de depot we say we are following this file “closely”. It is noteworthy that Celsius’ difficulties come at a time when investors are reducing their risk in all asset classes. A Celsius spokeswoman said: “Celsius is proactive in fulfilling its obligations to its customers and has fulfilled its obligations to its customers thus far.”
Wall Street in a bear market
In a climate of general risk aversion, everything directly or indirectly related to cryptocurrency was avoided like the plague on Monday, as evidenced by the results of the platform Coinbase (-11.4%) or the specialist in “mining” (Bitcoin) Blockin (- 10.1%). Bitcoin is down nearly 15% from $23,500. All to put it in the context of the generalized downturn in the stock market, Wall Street out of fear that inflation isn’t prompting the US central bank (Fed) to tighten the screws since an economic slowdown, even a recession, looms.
The Dow Jones lost 2.8% to 30,517.06 points, the technology-sensitive Nasdaq fell 4.7% to 10809.22 points, while the broader S&P 500 fell 3% 9% to 3,749.91 points. Entered into the S&P 500, which is the most representative index on Wall Street alcohol market, Which means it has lost more than 20% since its all-time high in early January (-22% at close on Monday).
Overall, investors are showing “a lack of confidence in valuations, knowing that earnings warnings remain few despite expectations of much slower growth or even a recession in the coming months,” according to Edward Moya, of Oanda.
The prospect of higher interest rates also destabilized the bond market, which has suffered a major decoupling. The yield on 10-year US government bonds, which is moving in the opposite direction to their price, rose to 3.38%, the first in more than 11 years. The yield curve, which links all bond maturities between short and long rates, was toppled on Monday, with the yield on two-year US Treasuries briefly exceeding 10 years, a signal sometimes interpreted as before.
Many believe that the VIX, which measures market volatility, despite jumping nearly 25% on Monday, is still far from levels historically consistent with the market’s approach to the bottom.