Celsius Network Ltd. paused withdrawals, swaps and transfers on its platform, fueling a broader market selloff as traders continued to question the sustainability of high-yielding tokens in the wake of the Terra blockchain collapse.
Celsius’s CEL token was down 31% to 24.2 cents as of 12:42 p.m. in Hong Kong, according to pricing data site CoinGecko, underperforming amid a slump in crypto assets that sent Bitcoin to its lowest level since December 2020.
Doubts about the sky-high yields backing protocols such as Celsius have intensified after Terra’s collapse in May and as tighter monetary policy from global central banks curbs demand for riskier assets. The CEL token promises “actual financial rewards,” including as much as 30% extra returns weekly, according to its website.
“The plunge of Celsius’s token $CEL seems to be a realization of the contagion risk of UST/LUNA into similar financial tools,” said Burak Tamac, senior analyst, regulatory and on-chain at CryptoQuant.
.@CelsiusNetwork is pausing all withdrawals, Swap, and transfers between accounts. Acting in the interest of our community is our top priority. Our operations continue and we will continue to share information with the community. More here: https://t.co/CvjORUICs2
— Celsius (@CelsiusNetwork) June 13, 2022
Lending and borrowing protocols underperformed, with their market caps down 10% compared with 6.4% fall in broader crypto universe, according to CoinGecko. Celsius peers Aave, Maple and Compound were down 7.5%, 14% and 9%, respectively.
“We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations,” the platform said in a memo on its website, adding that users will continue to accrue rewards during the pause.
Celsius’s moves come as cryptocurrencies are struggling more broadly. Bitcoin fell as much as 8.9% Monday, while Ether dropped as much as 12%. Both are declining for a seventh straight session.