The crypto industry just had one of its worst days ever — Here’s what happened

Crypto has had a brutal first half of 2022, but few days have been this bad for the industry that’s built itself up around digital currencies. On Monday, trading platforms halted withdrawals, companies cut jobs, and panicked investors dumped their holdings, dragging the market cap of crypto below $1 trillion, down from $3 trillion at its peak in November. Bitcoin plunged to an 18-month low, falling below $23,000. The most valuable cryptocurrency tumbled by 15% in the past 24 hours, while ethereum, which is second to bitcoin, fell 17%. The sell-off comes as investors rotate out of the riskiest assets due to macroeconomic headwinds and rising interest rates. But it’s worse than that. The action on Monday showed a fundamental mistrust of cryptocurrencies and the platforms that support them. What was already a deep downturn started to look like panic selling. Here are some of Monday’s crypto lowlights:

The Celsius contagion effect

For weeks, concern has been growing that Celsius, one of the more popular crypto staking and lending platforms, is in the midst of a liquidity crunch. Celsius offers users yield of up to 18.63% on their deposits. It’s like a product a bank would offer, except with none of the regulatory safeguards. Celsius’ cel token dropped from over $7 to about 33 cents in the last year — and it’s down more than 50% in the past week. Celsius is the biggest holder of the token. Meanwhile, the company’s $26 billion in client funds has more than halved since October. Celsius had previously admitted to losing funds, though it didn’t specify how much, as a result of the $120 million hack of decentralized finance platform BadgerDAO. Early Monday, Celsius shocked the market, announcing that all withdrawals, swaps, and transfers between accounts have been paused due to “extreme market conditions.” In a memo addressed to the Celsius Community, the platform also said the move was designed to “stabilize liquidity and operations.” “We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations,” the memo said. Celsius effectively locked up its $12 billion in crypto assets under management, raising concerns about the platform’s solvency. The news rippled across the crypto industry, reminding some of what happened in May, when a failed U.S. dollar-pegged stablecoin project lost $60 billion in value and dragged the wider crypto industry down with it. Shares of crypto trading platform Coinbase dropped 11% on Monday to their lowest since the company went public in April 2021.

Binance pauses bitcoin withdrawals

Binance also hit the pause button on Monday. The world’s largest crypto exchange halted bitcoin withdrawals for over three hours “due to a stuck transaction causing a backlog.” Although CEO Changpeng Zhao said the fix would only take a half hour, he later amended his estimate, saying it would take “a bit longer” than initially anticipated. By about 11:30 a.m., service had been restored. “A batch of $BTC transactions got stuck due to low TX fees, resulting in a backlog of BTC network withdrawals,” Binance wrote in a tweet. In a series of post-mortem tweets, the exchange noted that deposits were “unaffected” and explained that the problem stemmed from scheduled repair work. Zhao assured customers that all funds were “SAFU.” That’s a reference to the “Secure Asset Fund for Users,” which was set up by Binance in 2018 to protect users’ holdings. During the withdrawal outage, Zhao tweeted that it was still possible for holders to take out their bitcoin on other networks like CEP-20.

Layoffs ahead of ‘crypto winter’

Peter Thiel-backed start-up BlockFi has joined a growing list of crypto companies slashing costs by cutting jobs. On Monday, the company announced it would be reducing headcount by about 20%. Prior to the latest cuts, the company expanded from 150 employees at the end of 2020, to more than 850. CEO Zac Prince said in a tweet that BlockFi has been impacted by the “dramatic shift in macroeconomic conditions,” which have had a “negative impact” on growth. It’s becoming a familiar theme for companies in the space. Late last week, Crypto.com announced a staff reduction of 260 people, just seven months after the company gained naming rights to the arena that’s home to the NBA’s Los Angeles Lakers in a $700 million deal. Earlier this month Gemini said it would be laying off 10% of its workforce and warned that the industry is in a “contraction phase” known as “crypto winter.” Meanwhile, Coinbase has extended its hiring pause for the “foreseeable future” and plans to rescind some job offers.