- Cristina J. Orgaz @cjorgaz
- BBC News World
5 hours
image source, Getty Images
Bitcoin accumulates a 50% drop so far this year.
Buy, borrow and exchange cryptocurrencies with high percentages of profitability.
Those are the services offered by the Celsius platform, one of the largest lenders in digital currencies and a key player in the world of decentralized finance.
The firm decided on Sunday to protect itself from “extreme market conditions” freezendo the accounts of its 1.7 million users.
That decision, which was described as a “corralito” by experts in cryptocurrencies -in reference to the restriction of cash withdrawal from banks in Argentina in 2001- made the price of bitcoin and ethereum, the two largest virtual currencies by market value, will plummet on Monday, continuing a worrying downward trend.
“The crypto market has started the year having turbulence amid the increases in interest rates by the Federal Reserve, high inflation and the fall of the markets”, explains Alice Liu, senior associate at the firm WisdomTree, referring to the collapse of the sector.
![Bitcoin graph.](https://i0.wp.com/ichef.bbci.co.uk/news/640/cpsprodpb/6932/production/_125403962_gettyimages-1233327406.jpg?resize=800%2C450&ssl=1)
image source, Getty Images
Gone are the days of highs. Bitcoin is trading these days around 17-month lows.
The bitcoin accumulates falls above 50% in 2002, while the ethereum has lost 69% of its value.
And this, experts explain, has dragged the other currencies in a domino effect and has put several platforms in trouble.
What happened?
Celsius’s currency, the CEL, sank on Sunday and that’s where their problems really began.
At the company imposed then a “corralito” that prevents its clients from withdrawing funds, transferring them or even turn into money earned with cryptocurrencies.
And what is worse, it has not explained when it will restore those services.
As a consequence of this, Binance, the world’s largest cryptocurrency exchange, was also affected and had to “pauser” For a few hours the withdrawals of bitcoin.
![Ethereum](https://i0.wp.com/ichef.bbci.co.uk/news/640/cpsprodpb/B752/production/_125403964_gettyimages-1241222435.jpg?resize=800%2C450&ssl=1)
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Ethereum is the second largest cryptocurrency by market value.
Celsius, which has offices in the US, UK and Lithuania, said the freeze was done “for the benefit” of its entire “community.” to stabilize liquidity and operations as we take steps to preserve and protect assets.”
In a matter of a year, the CEL has gone from being worth US$7 to around US$0.20.
high rewards
the system Celsius, as a lending platform, rewards its customers with high interest rates for holding cryptocurrencies within its network.
That is, someone with a bitcoin might “store” the currency on this platform and in exchange receive rewards for it.
When someone decides to put the coin in stakingthe English name of this practice, undertakes not to carry out any operation with it.
In general, the more days you leave a cripto en stakingthe juicier the prima.
The reason a cryptocurrency earns rewards while in storage is because the blockchain puts it to work.
![bitcoin and dollar](https://i0.wp.com/ichef.bbci.co.uk/news/640/cpsprodpb/1AC7/production/_124655860_gettyimages-1384895904.jpg?resize=800%2C450&ssl=1)
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No legal protection
It is a system similar to savings accounts in traditional banks However, it does not have the same degree of legal protection.
According to its website, Celsius offers more than 7% interest on stablecoins like USDC and Tether; 7.25% for polygon, 6% for ethereum and 6.25% for los bitcoin.
They are percentages of earnings that no bank in the world can to offer nowadaysgiven market conditions and low interest rates.
The platform’s statement added that users will continue to accumulate rewards during the suspension of withdrawals.
![a digital key](https://i0.wp.com/ichef.bbci.co.uk/news/640/cpsprodpb/10370/production/_118661466_gettyimages-913017298.jpg?resize=800%2C450&ssl=1)
image source, Getty Images
Tether is considered a “stablecoin” because of its parity with the dollar.
“Too Good to be True”
What happened has led Gary Gensler, president of the SEC, the main financial regulator in the United States, to warn regarding promised returns of crypto lending platforms and products that seem “too good to be true”.
“How can someone offer (such a high percentage return) in today’s market without giving away a lot of information?” he said in a public forum.
Already in March, and not for the first time, the three European financial supervisory authorities warned consumers regarding the real risks of crypto assets, pointing out that are not suitable for most retail consumers as an investment or as a means of payment or exchange.
![Data centre](https://i0.wp.com/ichef.bbci.co.uk/news/640/cpsprodpb/110EF/production/_117317896_gettyimages-160000854.jpg?resize=800%2C525&ssl=1)
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Cryptocurrencies are “mined” on servers.
Nevertheless, “The cryptocurrency fever seems to be far from abating. It is estimated that around 10% of the adult population in Europe and 16% in the United States have some kind of investment in cryptocurrencies,” says Sam Theodore, senior consultant at Scope Group in a market commentary.
“Unfortunately, there are no estimates on how many of these investors understand how it works and the risks to which they are exposed“, he added.
For Paul Donovan, chief economist at UBS, the cryptocurrency market crash it is not important for the real economy.
The crypto market is imploding ( once more). Does this matter? No. Crypto is a bet, not an investment. Economies can benefit if the labor and resources of cryptocurrencies are transferred to economically useful sectors,” the economist said.
![Line](https://i0.wp.com/ichef.bbci.co.uk/news/640/cpsprodpb/11338/production/_112765407_line976.jpg?resize=464%2C2&ssl=1)
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