All of us have seen a sudden fall in the world of cryptocurrencies. In November 2021, Bitcoin crossed the value of $68,000, but today, you can see that it has lost its value by 70%. Not only Bitcoin, but almost all cryptocurrencies have lost 70% of their value. Due to this, crypto investors have lost over $2 trillion in the last 8 months. 

If we make a comparison between the crypto market and a country’s GDP, then you will find that the market capitalization of cryptocurrencies was $3 trillion dollars in 2021, which is way equal to the GDP of a few countries, such as Germany, Japan, the UK, India, and many more.

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But today, $2 trillion was wiped out from the market. And as of today’s date, the remaining market cap of cryptocurrencies is $1 trillion. 

Major reasons responsible for crypto crash 

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The crypto market has been badly affected due to several reasons which are as follows:

Long-term cause of crypto collapse

The Federal Reserve has been raising interest rates in the developed country of the United States in recent months, despite the fact that the US and other countries are experiencing high inflation. Till that date most of the biggest financial institutes used to borrow money from banks because of the low interest rate to invest in digital assets and the stock market. 

But today, due to the high interest rates, the short selling of digital assets such as cryptocurrencies has started. As a result, you can see the sharp fall in the crypto market. And many investors are considering crypto as one of the most volatile instruments for investment purposes. 

Immediate cause of crypto crash 

Just one month after the meltdown of the Terra blockchain network, an American crypto lending services company named Celsius has recently announced that it is freezing all the transactions, including withdrawals of all the digital tokens and coins. That means that if you have deposited some digital assets in your Celsius network account, then you will not be able to withdraw them until the Celsius network doesn’t unfreeze the withdrawals.

 What is Celsius Network?

The Celsius Network is a decentralized cryptocurrency lending platform that offers users interest-based saving accounts and enables them to do borrowing or transactions with digital and fiat assets. The platform operates using a cryptocurrency, Celsius (CEL). Users use CEL tokens as a collateral currency to get loans. Currently this token is trading below $1. 

Users can take loans and make payments on the platform using CEL. Moreover users on this platform receive added loyalty benefits.

The Celsius Network was founded in 2017 by S. Daniel Leon and Alex Mashinsky. The headquarters of this company is present in New Jersey.

What was the working model of Celsius Network and what is Crypto lending?

Celsius used to lend digital assets to the borrowers and charged low interest on the lent coins from them. And the digital assets used for lending were not their own. Those digital assets were the investors who put into their company to earn high interests on their assets by a concept called crypto lending. 

Cryptocurrencies are yielding a high return on investment for those who are prepared to take the necessary time to understand them. Bitcoin, the first and most well-known cryptocurrency, has generated a return on investment of over 1,000% since its inception in 2009. Other cryptocurrencies have seen even higher returns, with some reaching over 10,000%.  

Cryptocurrencies are not without risk, however. Like any investment, there is the potential for loss if the cryptocurrency is not properly managed. As you can see in the case of Celsius networks. Additionally, there is the risk of theft or hacking, which could result in the loss of your investment. If you are considering investing in cryptocurrencies, be sure to do your research and understand the risks involved.

Celsius Filed for Bankruptcy

The Celsius network has filed bankruptcy, the reason for it bankruptcy is the idea of this company which is responsible for this situation. The celsius network wanted to give high returns to its investors on their investments.  

Reasons responsible for its bankruptcy:-

• The current global and crypto market scenario has badly affected the Celsius network due to which $2 trillion has been wiped out, leading the Celsius network to bankruptcy. 
• Initially, Celsius promised its customers to provide high returns, but Celsiusnetwork was only able to generate extremely small profits due to the current poor market situation. As a result, the Celsius network didn’t have funds and couldn’t prepare itself for the current bearish market situation. Due to this, they had to file for bankruptcy.
• Finally, the third reason which is responsible for Celsius’s bankruptcy is that they lent $650 million in crypto assets to Tree Arrows, but due to the current poor market situation, they were unable to pay back the lent assets to Celsius Network. Both companies had to file for bankruptcy for the same reason.

Conclusion:

The market for cryptocurrencies is highly volatile. Investments made in the cryptocurrency market contain high risk. So, before trusting any lending company like Celsius Network, make sure to analyse its background and all the possible risks that can cause steep losses to your portfolio. Overall, from the above article, we can conclude that the collapse of the crypto market is one of the biggest reasons for the bankruptcy of Celsius Network and other crypto lending companies. Due to this, many investors have to suffer a lot.