Cryptocurrencies have not had an easy start to the year, with Bitcoin plunging by 50% within four months of reaching a record high of nearly $69,000 in November 2021. The market did not stabilise, with Bitcoin dropping below $25,500 in May. This month, the crypto market is experiencing yet another worrying and unstable situation, which is leading some companies to take extraordinary measures like the corralito.
A corralito is a restriction imposed by governments to prevent a bank panic where citizens withdraw all their money, which can cause financial institutions to go bankrupt. In the crypto market, companies are taking measures to avoid the loss of value for currencies after a market instability. Celsius is a crypto lending company that offers abnormally high interest rates of up to 18%, with deposits invested in merchants and lenders. The company announced a cryptocurrency corralito, pausing all withdrawals, swaps, and transfers due to extreme market conditions. Celsius is bleeding, impacting not only the Celsius token itself but also Bitcoin.
Investors have become very worried as they can not cash out or withdraw any money until Celsius lifts the ban on transactions. Mental health resources are being promoted by the platform’s subreddit, and investors are confused about the situation. Meanwhile, the crypto exchange Binance also announced a temporary pause in Bitcoin withdrawals. As Bitcoin declines and Ether loses almost two-thirds of its value, it is clear that the May cryptocurrency crash is not yet over. Although long-term Bitcoiners are not worried, a further decline could hurt market participants.
Investing in crypto platforms or decentralized services comes with its own unique set of risks considering recent market trends. In contrast, some investors may opt for centralized services of current physical currencies like the euro or dollar, which are not decentralized but have their own forms of regulations and securities to protect investors.