Crypto firm Celsius, which has been struggling with the payments crisis for about a month, has filed for bankruptcy. Celsius is the third largest crypto company to file for bankruptcy in the last two weeks.
Celsius, one of the world’s top crypto companies, has filed for bankruptcy in US courts following the troubles it has faced over the past month. Cryptocurrency lending platform Celsius Network halted its customers’ withdrawals in June.
Celsius said yesterday it would seek to stabilize its business by restructuring it to “maximize value for all stakeholders”. Celsius, meanwhile, said it had $167 million in cash to support the operation.
The crypto company stated that its estimated liabilities in its bankruptcy filing range from $1 billion to $10 billion. In addition, the company said it had more than 100,000 creditors.
“This is the right decision for our community and our company,” Alex Mashinsky, co-founder and CEO of Celsius, said in a statement. “I am confident that we will see this moment in the future as a moment when the company strengthens its future,” Mashinsk said.
WHAT HAPPENED?
Before the company went into crisis, it offered its clients over 18% returns when investing in crypto with Celsius. The platform then lent this money to actors who were willing to pay a high interest rate. However, the price drop has put pressure on this model, and Celsius cited “extremely volatile market conditions” as the reason for the pause in payouts.
Celsius-owned token CEL fell more than 70 percent following the developments, and the value of Bitcoin also fell. Celsius’s troubles exposed the weaknesses of the high-yield lending models used in the cryptocurrency market.
BANKRUPTCY OF THE THIRD COMPANY…
Three Arrows Capital (3AC), a Singapore-based cryptocurrency hedge fund, filed for bankruptcy in US courts last week pending liquidation in the British Virgin Islands. With this application, the company sought protection from creditors before the US courts.
Voyager Digital, one of the companies struggling to sustain operations in the current conditions in the crypto money markets, also filed for bankruptcy last week.
BANKRUPTCY
It was triggered after the Terra and Luna crises that some companies in the cryptocurrency industry went into a payment crisis and were on the verge of bankruptcy. and the collapse of Luna caused about $45 billion in losses to the market.
As a result, the losses of companies that could not provide sufficient liquidity increased to such an extent that in 2022 they could no longer be offset by the funds withdrawn from the crypto money markets and the path to insolvency was open. Likewise, the crypto decline that has been ongoing since November, triggered by the US Federal Reserve’s rate hike moves, led to losses for companies.
CRYPTO EARTHQUAKE CONTINUES
In November 2021, a bitcoin price hit an all-time high when it traded at $67,000, after which the Fed’s monetary tightening and the risks the Ukraine-Russia war posed to the economy caused investors to flee from risky assets like the Stock market and bitcoin fled crypto.
After that, the crisis in the Luna ecosystem deeply shook investors’ confidence in crypto assets, and this collapse cost the crypto market billions of dollars.
While Bitcoin has settled below $20,000 over the past few days, the leading cryptocurrency is down nearly 60 percent year-to-date, and around 70 percent since its all-time high.
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