NEW YORK (AP) — The value of bitcoin and different cryptocurrencies plummeted Monday after a serious cryptocurrency lender successfully failed and halted all withdrawals from its platform, citing “excessive market situations.”

It’s the newest high-profile collapse of a pillar of the cryptocurrency trade. These meltdowns have erased tens of billions of {dollars} of traders’ property and spurred pressing calls to control the freewheeling trade.

Bitcoin was buying and selling at roughly $22,400 late Monday, down greater than 16% previously day. Ethereum, one other extensively adopted cryptocurrency, was down roughly 17%. Buyers have been promoting riskier property reminiscent of digital currencies and know-how shares because the Federal Reserve raises rates of interest to fight excessive inflation.

On Sunday, the cryptocurrency lending platform Celsius Community introduced that it was pausing all withdrawals and transfers between accounts as a way to “honor, over time, withdrawal obligations.” Celsius, with roughly 1.7 million clients and greater than $10 billion in property, gave no indication in its announcement when it could enable customers to entry their funds.

In alternate for purchasers’ deposits, the corporate pays out extraordinarily beneficiant yields, upwards of 19% on some accounts. Celsius takes these deposits and lends them out to generate a return.

Lending platforms reminiscent of Celsius have come underneath scrutiny just lately as a result of they provide yields that ordinary markets couldn’t help, and critics have referred to as them successfully Ponzi schemes.

Francisco Orduna, 36, mentioned he was referred to Celsius a couple of yr in the past and was drawn to the corporate’s guarantees of excessive yields on his crypto holdings.

“It was simple to miss the danger as a result of customers bought used to those weekly curiosity payouts from Celsius,” Orduna mentioned. He pulled most of his cash out of Celsius late final week however mentioned he had nonetheless residual holdings trapped on the platform.

It’s the second notable collapse within the cryptocurrency universe in lower than two months. The stablecoin Terra imploded in early Might, erasing tens of billions of {dollars} in a matter of hours. Stablecoins have been seen as comparatively secure, as a result of they’re speculated to be backed by onerous property, reminiscent of a forex or gold.

Identical to Terra, Celsius had offered itself as a secure place for cryptocurrency holders to deposit their funds. Even whereas Celsius was failing, the corporate’s web site marketed that customers can “entry your cash every time, maintain them secure endlessly.”

“There may be lots of work forward as we take into account numerous choices, this course of will take time, and there could also be delays,” Celsius mentioned in a press release.

The transfer shocked traders and depositors. In on-line chats, they questioned why their investments weren’t protected.

Orduna mentioned he pulled his cash out of Celsius partly due to the Terra implosion. There have been studies that Celsius had invested a part of its customers’ funds in Terra, and there have been issues that Celsius was taking too excessive of a danger with depositors’ funds.

“I began to fret whether or not the yield they have been providing was actually sustainable,” he mentioned.

It’s unclear whether or not Celsius depositors will get all their funds again. A cryptocurrency lender will not be regulated like a financial institution, so there’s no deposit insurance coverage and no authorized framework for who will get their a reimbursement first, like in a chapter. It’s potential that Celsius’ traders, which embrace Quebec’s pension fund and the distinguished enterprise capital fund WestCap, could get their funding again earlier than Celsius’ depositors will.

WestCap didn’t reply to a request for remark. The Pension Board of Canada additionally didn’t reply to a request for remark.

“This was one more financial institution run. You’re not reinventing something right here. They have been selling their providers as a greater financial savings account however in the long run, you’re simply one other unsecured lender,” mentioned Cory Klippsten, CEO of Swan Bitcoin, who has been publicly skeptical of Celsius’ enterprise mannequin for years.

Terra, and its token Luna, provided related yields on buyer deposits. These tokens collapsed after big buyer withdrawals pressured Terra’s operators to liquidate the entire property getting used to help their currencies. The collapse of Terra has spurred requires reform from the cryptocurrency trade, and requires Congressional regulation.