- Hong Kong-based Babel finance is suffering from the current crypto bear market.
- The number of crypto firms experiencing financial implosion keeps rising.
Babel finance, a crypto-financial service provider out of Hong Kong, joins the list of companies struggling to cope with the current bear market. The company announced a temporary suspension and redemption of digital assets on Friday.
Why Babel is suspending withdrawals
The company is hugely impacted by the current bear conditions in the crypto market. Hence, it has struggled to pay its investors. Babel finance joins the list of crypto lending firms struggling to cope with the chaos in the crypto market.
Per multiple media outlets, the digital asset lender claimed that it is experiencing an “uncommon liquidity pressure.” Hence, it didn’t have any choice but to make this announcement. Bitcoin has lost over 60 percent of its value since reaching an all-time high of $69,000 last November. Investors continue to sell off their risky assets (including Bitcoin) following tighter monetary policies by central banks.
Is another crypto company on the verge of collapse?
An official statement from Babel finance reads,
we have uncommon liquidity pressures. The strong market volatility has contributed to risk occurrences affecting all institutional crypto market players, including us.
It seems that the succession of the collapse of crypto firms won’t end soon. Every day there is news of one or more crypto companies collapsing or on the verge of collapse. The recent insolvency issues of Three Arrows Capital are still fresh in investors’ minds.
Following Three Arrows Capital’s uncertainty, one of its subsidiaries (Finblox) announced that monthly withdrawals on its platform are now limited to $1,500. It also announced that it no longer offers incentive distribution.
Can Babel finance find a quick solution to its liquidity issues?
Babel finance’s issues make it clear that many crypto lending firms are feeling the heat of the current crypto bear market. However, the crypto lending firm has revealed that it is discussing with all relevant parties to find a solution and protect its customers. Last month, Babel raised $80M in Series B funding based on the company’s $2B valuations.
It is important to note that the company’s outstanding loans increased by $1B between February and December 2021. Each Babel’s derivatives trading operation is more than $800M. Since being in business, the company has traded over $20B worth of options contracts.
Babel finance isn’t the only crypto company that has halted withdrawals in recent times. Earlier in the week, Celsius announced a suspension of digital asset withdrawals and swap and transfer products. Celsius’ announcement revealed the rising loan issues facing crypto lending platforms.
Following this Celsius announcement, its token price slumped by 50 percent within 24 hours. Also, leading crypto exchange, Binance, suspended Bitcoin withdrawals, citing network congestion. The Terra network crash and the continued decline in Bitcoin’s price suggest that neither of the crypto firms above may recover soon.