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Has crypto lending triggered crypto market crash?

As key cryptocurrency values have dropped to a four-year low, the crypto market has entered a negative phase. Several cryptocurrency businesses have gone out of business due to the current bear market, and many more have had to make drastic job layoffs in order to stay afloat.

The Terra scandal, which saw $40 billion in investor funds disappear from the market, marked the beginning of the cryptocurrency market crisis. The cryptocurrency market at the time demonstrated strong resistance against such a severe drop. The crypto market, particularly crypto loan firms, which many believe are to blame for the present bearish phase, was, however, more severely affected by the collapse’s aftereffects.
The lending crisis started in the second week of June when major lending institutions began to transfer their money to avoid liquidating their overleveraged positions. However, the strong selling that placed downward pressure on prices caused prices to fall even further.

High Leverages

Preventing withdrawal of funds from the platform on June 12 in an effort to stay active, Celsius Network, a cryptocurrency lending company that has been under the scrutiny of its crypto-interest interest accounts, became the first significant victim of a market crisis.
With a sharp decline in Ether (ETH) prices as the trigger, Celsius’s liquidity problem started, and by the first week of June, only 27% of the ETH was liquid. The Celsius Network may have hired new attorneys amid a tumultuous cryptocurrency market, according to reports from various media publications during the past week.
Five US states’ securities watchdogs are apparently looking into the cryptocurrency loan platform Celsius after it decided to halt user withdrawals.

Macro Factors

From a distance, it may seem that market conditions are a major cause of the problem for most lenders. However, closer inspection reveals that the problems appear to be more serious with the company’s day-to-day operations and the spiralling effects of poor decision-making.
As a result of Celsius’s insolvency crisis, Cory Klippsten, the founder of Swan Bitcoin, and Dan Held, a prominent Bitcoin influencer, among others, warned of unscrupulous business practises on the loan platform. On June 18, they outlined a number of problems with Celsius operations that had gone undiscovered up to that point in a Twitter thread.

Read more: UAE based crypto exchange BitOasis layoff employees amid crypto market crash

Kunal Krishan
Kunal Krishan
Kunal is an investment space writer who firmly believes investment is something which should not be a choice but a part of everyone's life.


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