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Thailand’s digital asset market faces more turmoil

US cryptocurrency lender goes bust

The collapsing value of Thai digital assets has been exacerbated by the bankruptcy of US-based Celsius Network, following months of rapidly deteriorating sentiment in the global and domestic cryptocurrency markets and a series of insolvencies among high-profile crypto lenders.

The trading value of digital assets in Thailand plunged from 180 billion baht in December 2021 to 72 billion in June 2022, with data from the Securities and Exchange Commission indicating the number of active crypto trading accounts in Thailand also dropped 53.5% to 329,000 from 707,000 during the same period.

Celsius made the news last month when it froze its customers’ accounts, preventing them from withdrawing or transferring their deposits in order to stabilise the business and protect its clients amid “extreme market conditions”.

Much like a bank, a crypto lender allows its users to deposit cryptocurrency to earn interest and take out loans. During the bull market, Celsius provided these services while offering depositors high annual returns of up to 18%.

However, Celsius stopped withdrawals on June 13 amid deteriorating crypto market conditions, and the company announced on Wednesday this week it was filing for bankruptcy after submitting a document to confirm it has a US$1.2 billion deficit with liabilities of $5.5 billion, exceeding the company’s assets of $4.3 billion.

The document indicated most of the company’s liabilities were debts it owed its users, who have deposited cryptocurrency worth more than $4.7 billion.

Alex Mashinsky, the Celsius chief executive, stated in the filing that many factors led to the bankruptcy, including the company’s inability to handle growth, unanticipated losses, a tumultuous market, the “cryptocurrency winter” referring to the current bear market, and the diffusion of misinformation surrounding the company from media and social media.

He also cited a “domino effect” as one reason the company became insolvent, with recent disasters sending ripples throughout the industry.

Negative sentiment surrounding the crypto market was compounded in May when Luna and the stablecoin TerraUSD collapsed.

Mr Mashinsky said when the Luna cryptocurrency plummeted in value, it caused the crypto hedge fund Three Arrows Capital (3AC), which had exposure to TerraUSD, to go into liquidation, rendering it unable to repay loans to Voyager Digital, another lender, which also filed for bankruptcy.

Both 3AC and Voyager Digital were prominent players in the crypto scene, with Celsius the third high-profile crypto company to go bust.

Mr Mashinsky said he was considering a recovery plan that involves mining Bitcoin and mentioned plans to restructure the company to continue operations.

For cryptocurrency investors, the bankruptcy means aside from being unable to repay more than $80 million to other crypto companies such as Alameda Research, the move may heighten distrust in exchanges and other lenders, leading to a fresh selloff.

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