crypto crash: Crypto’s excruciating week has traders bracing for next crisis

It was one of the most dramatic weeks in the short history of the cryptocurrency market, bookended by the type of announcements investors fear the most from a counterparty: We’re sorry, but we just can’t return your money right now.

In between, a nascent technocratic industry with grand ambitions to reinvent the financial system was rocked repeatedly by echoes of past crises in the old system. It was a week of margin calls, forced selling and important collateral being exposed as way too illiquid in a time of crisis. There were rumblings of hedge-fund blowups, tales of opportunistic predatory trading, job cuts and loud denials of problems from key players proven wrong almost immediately.

Amid it all, the myth was shattered once and for all that this new crypto financial system was somehow immune to — or even able to benefit from — the economic fundamentals currently punishing the old system.

It all started late Sunday, when a sort of crypto shadow bank called Celsius Network suspended withdrawals from depositors who had been enticed by sky-high interest rates that, in retrospect, were likely too good to be true. By the end of the week, on the other side of the world in Hong Kong, the digital-asset lender Babel Finance also froze withdrawals.

[email protected] 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.

— Celsius (@CelsiusNetwork) June 13, 2022

We’re working on it, both firms told customers, and no doubt they are. Yet speculation is growing that Celsius Network, at least, is drowning in what research firm Kaiko called a “Lehman-esque” position.

Like Lehman Brothers did almost 14 years ago, Celsius’s woes showed how interconnected big players in this financial system are and how fast contagion can spread, making this week’s drama the sequel to last week’s and the prequel to…


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