Crypto and what it means to wider international markets is drawing closer scrutiny after its "Black Monday" rout cost the sector over $1 billion in liquidations.
Now, everyone from investors to regulators is asking how far crypto's contagion spreads — and if the people who invested in the now-shaky parts of the sector have any hope of getting their money back.
The sector alone dropped below a $1 trillion valuation on June 14, while bitcoin hit an 18-month low to trade at $20,193.
And major crypto players announced layoffs, steep drops in value and a variety of liquidation obligations they had to lenders, should their businesses ultimately fail.
But as of June 15, no one was facing more questions than crypto lender Celsius Network, which halted withdrawals from its platform after citing “extreme market conditions.”
News that Celsius had hired restructuring attorneys on June 15 sent alarm bells through the investor community.
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What Should Celsius Investors Expect Now?
For now, anyone who put money into Celsius or has assets held there in a now-untouchable wallet, shouldn't expect much action right away.
Celsius did not respond to a request for comment.
But the company did post an update June 15 saying that it was actively working toward a solution.
Adam Levitin, a Georgetown University Law Center professor who specializes in bankruptcy, tweeted that for now, the company is likely weighing its options going forward.
That means no one should expect any lifting of a withdrawal ban anytime soon.
Despite all that, Levitin said it is "very likely" that Celsius will go bankrupt, meaning that investors would likely be behind creditors of the exchange before they can collect any investment.
What Does Celsius Owe And to Whom?
The tricky part for investors is waiting until the company issues a plan outlining how it plans to handle any possible liquidation or resolution for debts owed.
That has the market trying to price in exactly who loaned what to Celsius.
Perhaps most importantly, traders and investors are also trying to figure out how that lending could possibly spread or contaminate other sectors, including banks, hedge funds or anyone else exposed to Celsius's losses.
"Celsius has an outstanding $231 million loan owed to decentralized finance (DeFi) lending protocol Maker," Fortune reports.
"While Celsius is paying down their debt, it’s continuing to top up wrapped bitcoin as collateral for the vault, rather than closing out the position," Fortune reports. "The vault becomes vulnerable to liquidation if bitcoin falls to $14,003.16."
Because of those types of loans and the currencies used to back them, some parts of the market are getting nervous that the fallout from Celsius and crypto's Black Monday have only just begun.
“There’s definitely risk of contagion effect and cascading liquidations,” Andrew Thurman, content lead and analyst at leading blockchain data firm Nansen, told Fortune.
