Celsius Withdrawal Halt Reveals Run Risks on Other Crypto Banks

Crypto lending platform and Celsius-investor Tether attempted to distance itself from Celsius on Monday as markets continued to slide


Source: Shutterstock


key takeaways

  • Celsius announced on Sunday evening that it would be pausing withdrawals, swaps and transfers between accounts on its platform due to “extreme market conditions”
  • Industry members are calling the situation a run, and it can happen to others in the space

As cryptocurrencies and related equities continue to tumble, industry participants are questioning how the crumbling of crypto lending platform Celsius might impact digital asset markets elsewhere. 

“Certainly we could see some contagion,” Rasheed Saleuddin, head of research at Blockworks, said. “Transparency is key in shadow banking markets.” 

Celsius, sometimes referred to as a quasi-bank because it straddles the line between decentralized and centralized finance, said on Sunday it would pause withdrawals, swaps and transfers between accounts on its platform due to “extreme market conditions.”

“We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations,” the firm wrote in a blog post

The company said its decision to pause withdrawals was essential to “stabilize liquidity and operations.”

Monday morning, crypto exchange Binance paused bitcoin withdrawals for about three hours as markets continued to reel from Celsius. Binance attributed the suspension to “minor hardware failures” that caused transactions to backlog, according to a tweet

“We’ve seen a lot of transactions, and we’re nowhere near the size of Binance,” said Chris Kline, chief operating officer and co-founder of Bitcoin IRA. “We have a couple billion dollars — they’ve gotten almost a trillion, but you can imagine what happens, the technology really gets pushed to the limit, and it’s a stress test on your system.” 

Runs can stress any financial system, Kline added. 

“Just like if this was happening in stocks, there’d be houses like Fidelity, TD Ameritrade, etc., having problems with too many people in the system,” Kline said. “Too many people doing things causes backlogs.”

What is happening to Celsius and what happened to Terra’s UST in May are runs, Saleuddin said, and there is no telling which other companies could be impacted. 

“Is BlockFi at risk? Nexo? It depends how liquid they are,” Saleuddin said. 

​​Fellow quasi-bank Tether attempted to distance itself from Celsius in a blog post Monday. 

“While Tether’s investment portfolio does include an investment in the company, representing a minimal part of our shareholders equity, there is no correlation between this investment and our own reserves or stability,” the lending platform said. 

Because its disclosures are vague, it’s impossible to know exactly how risky Tether’s assets are, Saleuddin said. 

“But we do know they hold tokens, precious metals, a decent amount of low-grade commercial paper, and are exposed to Celsius,” Saleuddin said. “What would it take for a run on Tether? The truth is that we don’t know.”

Don’t miss the next big story – join our free daily newsletter.


Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png


Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.



Though the opposing flow trend is likely to slow over time, industry watchers note, bitcoin fund assets could one day eclipse the $90 billion gold ETF space


Celestia had the first mover advantage. EigenDA has staked ether. What sets Avail apart?


Bitcoin moved 1% higher Monday morning in New York, Matrixport analysts say $62,000 could happen next month


It’s hard to believe right now that crypto — even with all of its flexibility and massive capabilities — could ever be like cash on the internet


Michael Saylor announced Monday morning that MicroStrategy bought 3k more bitcoin after the X account was compromised over the weekend


Plus, Pudgy Penguins grows its brand and a group of Autoglyphs sell for $14.5 million