Babel Finance Follows Celsius In Pausing WithdrawalsJune 18, 2022
On June 18, Hong Kong-based crypto lender, Babel Finance, announced that it is experiencing “uncommon liquidity pressures.” According to the firm, there are three reasons why they are experiencing these pressures.
They are the current crypto market situation, the consequent volatility, and the risk exposures. The crypto lender apologized to its investors before stating that it would send a separate notification when it resumes normal service.
Babel And Celsius Take Similar Actions
Some days ago, Celsius announced a suspension of withdrawals, transfers, and swaps for its platform users. It cited “extreme market conditions” as its reasons.
It is worthy of note that Babel finance only offers crypto lending services for stablecoins, Bitcoin, and Ethereum. Based on this announcement, Babel finance’s 500 users would be unable to withdraw their stablecoin, Bitcoin, and Ethereum crypto assets.
Despite offering this limited service, the company’s balance sheet for 2021 showed that it owes over $3B. However, its average volume in trading derivatives is more than $800M.
Nevertheless, the platform hasn’t explained how it intends to find a solution to its current crisis. In contrast, Celsius has disclosed that it employed the services of Citigroup as an advisor till it solves its current crisis.
Various data estimates showed that Celsius’ userbase is nearly 1.7 million. However, many of the whales on the platform have been making huge sell-offs recently. Within 24 hours after announcing its liquidity issues, the price of Celsius’ native token dipped by over 55%.
Amber Group Claims Its Business Is Still Intact
Meanwhile, the crypto market slump continued this week. Its overall evaluation dropped from $1.3 trillion to $937B within seven days. The value of the leading digital asset plunged by more than 34% in less than a week, according to Coingecko data. Bitcoin currently trades below $20K.
Despite the crypto market slump, Amber Group (another top crypto lending firm) has said its business isn’t affected by the current market situation.
Amber explained via a blog post that it isn’t involved in any business where it needs to underwrite the credit risks of borrowers. It also added that it has no plan to engage in such business for the foreseeable future.
The firm also stated that it doesn’t have risk exposure in either market with “solvency issues.” Hence, Amber stated that its business would continue to run as usual. Users can deposit, trade, earn and withdraw without disruption.
Is There A Way Out For Babel Finance?
Babel finance and Celsius’ issues show that crypto firms are the most uncomfortable with the intense selloffs in the crypto market. Last week, controversial crypto exchange, Binance, announced a temporary pause on BTC withdrawals.
It is slightly surprising that Babel is facing liquidity pressures given that it recently raised $800M last month via a series b funding. The crypto market is yet to recover from last month’s terra network crash. Also, the BTC price keeps declining without showing any signs of recovery. Hence, it is safe to say that neither Celsius nor Babel finance would recover quickly from their current woes.