Bitcoin plunges as major crypto lender halts operations

moneycontrol.com:

The price of bitcoin and other cryptocurrencies plummeted Monday after a major cryptocurrency lender effectively failed and halted all withdrawals from its platform, citing “extreme market conditions.”

It’s the latest high-profile collapse of a pillar of the cryptocurrency industry. These meltdowns have erased tens of billions of dollars of investors’ assets and spurred urgent calls to regulate the freewheeling industry.

Bitcoin was trading at roughly $22,400 late Monday, down more than 16% in the past day. Ethereum, another widely followed cryptocurrency, was down roughly 17%. Investors have been selling riskier assets such as digital currencies and technology stocks as the Federal Reserve raises interest rates to combat high inflation.

On Sunday, the cryptocurrency lending platform Celsius Network announced that it was pausing all withdrawals and transfers between accounts in order to “honor, over time, withdrawal obligations.” Celsius, with roughly 1.7 million customers and more than $10 billion in assets, gave no indication in its announcement when it would allow users to access their funds.

In exchange for customers’ deposits, the company pays out extremely generous yields, upwards of 19% on some accounts. Celsius takes those deposits and lends them out to generate a return.

Lending platforms such as Celsius have come under scrutiny recently because they offer yields that normal markets could not support, and critics have called them effectively Ponzi schemes.

Francisco Orduna, 36, said he was referred to Celsius about a year ago and was attracted to the company’s promises of high yields on his crypto holdings.

“It was easy to overlook the risk because users got used to these weekly interest payouts from Celsius,” Orduna