After Celsius, Is This Crypto Lender Facing A Liquidity Crunch?

Crypto lender Celsius’ recent suspension of withdrawals has rattled sentiment towards its peers, with majors such as Nexo and BlockFi now facing potential bank runs.

The situation has also been exacerbated by the possible insolvency of major hedge fund Three Arrows Capital, to which several lending platforms are heavily exposed.

This uncertainty has prompted several crypto lenders to clear the air over their exposure to the two entities, and the potential fallout from a liquidation.

BlockFi is the latest lender to reassure investors over its liquidity conditions. The firm also appears to have liquidated a loan held by Three Arrows.

BlockFi’s comments also come a few days after peer Nexo offered a similar reassurance. The firm also offered to purchase Celsius’ remaining assets.

Crypto lender BlockFi reassures investors

Zac Prince, CEO of BlockFi, said in a Twitter thread that the firm has sufficient risk management mechanisms in place to mitigate risks from a potential bank run.

Prince also said that the firm had recently liquidated a loan when a “large client” failed to meet its obligations on an overcollateralized margin loan. Considering that Three Arrows’ woes stem largely from a drop in the value of its collateral, Prince could be referring to the hedge fund.

The Financial Times reported that BlockFi had indeed reduced its exposure to Three Arrows. The hedge fund was a “strategic” investor in the crypto lender.

No client funds are impacted. We believe we were one of the first to take action with this counterparty.

-Zac Prince, CEO of BlockFi

Prince added that the crypto lender is able to fulfill increased demand from investors, and intends to raise its interest rates to match a recent rate hike by the Federal Reserve.

But BlockFi’s difficulties lie elsewhere

Despite Prince’s reassurances, BlockFi is still feeling the brunt of the recent crypto downturn. The firm recently slashed 20% of its roles, following a sharp decline in crypto prices.

The firm was also fined $100 million by U.S. regulators for allegedly selling unregistered securities.

The crypto lender has also gotten into hot water for misleading investors over the collateralization of its loans- something that could come to fore amid the ongoing crash.

With more than five years of experience covering global financial markets, Ambar intends to leverage this knowledge towards the rapidly expanding world of crypto and DeFi. His interest lies chiefly in finding how geopolitical developments can impact crypto markets, and what that could mean for your bitcoin holdings. When he isn’t trawling through the web for the latest breaking news, you can find him playing videogames or watching Seinfeld reruns.
You can reach him at [email protected]

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