What savers should know now about the cryptocurrency crisis

Bitcoin investors are used to price fluctuations, but a certain nerve is being tested: in a few days, digital money has lost about a third of its value. Last Friday, bitcoin cost around $30,000, and by Monday night, the price had dropped to nearly $20,000. Tuesday’s recovery only lasted a few hours before the price pulled back again.

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Celsius Networks freezes accounts

The situation was exacerbated by problems with the Celsius Network platform. “Due to severe market conditions,” the US financial broker has frozen the balances of its clients until further notice. This also affects savers in Germany: anyone with a so-called Bitcoin earnings account in the new Berlin bank Nuri will not be able to access their funds for the time being either.

A spokesperson for Nouri told the German Liberation Network (RND) that it was not yet clear how long this would last. “We are working hard to obtain more detailed information from our partner Celsius about the duration of the payment freeze.” Nouri did not mention the number of customers affected and the amounts at risk. The spokesperson only said that “a portion” of about 500,000 customers use the income account.

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It seems that customers are withdrawing more and more money

It is clear that the percentage is the victim and at the same time the accelerator victim of price slippage on cryptocurrency exchanges. The platform offers cryptocurrency-related services, among other things, collecting bitcoins from savers and lending them to other customers for interest – ultimately the classic bank business model. According to its own information, Celsius has 1.7 million customers, balances in bitcoins amounting to several billion dollars.

Apparently, recently customers have withdrawn more and more funds. On Monday morning, the company announced the suspension of all withdrawals and transfers, citing a paragraph in the terms and conditions that makes this possible. The exact reasons have not been provided, and countermeasures are still open. “We have a lot of work ahead of us and we are looking at different options. This process will take some time and there may be delays.”

That’s all they know at Nouri’s headquarters in Berlin. It is currently not possible to “make any more precise statements” about the reasons for the payment freeze. Founded in 2015 under the name Bitwala, Nuri is one of the largest German FinTech companies. With the Noori app, you can manage your account, but also invest in cryptocurrencies. However, the actual banking services are provided by Solarisbank. Nouri himself does not have a banking license and is only registered as a broker with the financial regulator Baffin.

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How it works

The percentage imbalance affects the Nuri Bitcoin earnings account, which according to the company has not been able to close again since Monday. It was advertised as a prescription against zero interest rates and inflation. “The days of low interest rates are finally over,” the site said. “Our partnership with Celsius Network gives you access to rates of return that you can’t get with an old bank account.” With the return calculation, the value of your bitcoins grows by up to 3% annually. And all by itself.”

Principle: Nouri sends savers’ bitcoins to Celsius, where they are loaned to other platform participants. These pay the benefits that Nouri customers share. The amount of interest and therefore the income on Nouri’s account depends on the demand for credit. “When the demand for credit is high, the percentage score can pay a higher return for the desired cryptocurrency,” explains Nouri’s spokesperson. Recently it was three per cent per year.

Investors bear the entire risk of Celsius Network’s bankruptcy.

Nouri Ltd.

Risk Warning for Bitcoin Income Account

The downside can be found under the specific risks information. “For the client, there is the risk of complete loss,” she says. Because Nori advertises a €100,000 deposit guarantee – but not for this product. “Investors bear the entire risk of the Celsius Network going bankrupt,” the risk information says, in the event of a percentage failure, no one will intervene. In addition, the company is not subject to “extensive government oversight”.

When and how Bitcoin savers can use their balance again is completely open. The spokesperson said Nouri “will continue to strongly insist that our customers be able to make withdrawals again as quickly as possible.” Celsius said it had frozen the accounts to ensure liquidity and protect assets. Interest will continue to be credited to the accounts.

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Cryptocurrency market is under pressure

However, for crypto assets, times are likely to remain turbulent. The rising risks and concerns about the rapid rise in interest rates have a greater impact here than on the stock market. Both are pushing investors out of risky and interest-free crypto assets.

Bitcoin, the largest and most popular cryptocurrency, rose sharply to $67,000 by last fall. However, when I began discussing the interest rate, it fell sharply. At the beginning of April, it reached a temporary high of just under $50,000, after which it more than halved within ten weeks.

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