Another collapse begins? US crypto asset market maker BlockFills suspends customer withdrawals

1. Cryptocurrency liquidity provider and lending platform BlockFills has suspended customer deposits and withdrawals, related to the sharp decline in Bitcoin prices; 2. Bitcoin has fallen 23% year-to-date, with other cryptocurrencies also performing poorly, potentially triggering a liquidity crisis in the market; 3. BlockFills is relatively small in size, and the suspension of withdrawals may not cause systemic risk, but it remains a setback for the industry.

The cryptocurrency industry may face a new crisis. According to reports from various sources, US-based crypto liquidity provider and lending platform BlockFills has suspended customer deposits and withdrawals, directly linked to the recent sharp drop in Bitcoin prices.

The platform issued a statement on Wednesday stating that it had paused withdrawals last week but has been actively working to restore liquidity. A platform spokesperson also said they are engaging in active communication with clients, including crypto hedge funds and asset management firms.

As of press time, Bitcoin has rebounded slightly to around $67,500, down 23% year-to-date, nearly 45% below its all-time high set in October last year. Other cryptocurrencies are also performing poorly, with the top 20 tokens tracked by CoinMarketCap declining over 25% this year.

The decline in the crypto market could also trigger chain reactions, such as liquidity crises at crypto exchanges. Previously, the FTX collapse in November 2022 was related to the crypto bear market.

At that time, FTX also announced a pause on customer withdrawals, but the situation quickly worsened, leading FTX to declare bankruptcy within days, further accelerating the decline of cryptocurrencies, with Bitcoin dropping over 20% that week.

Relatively Small Size

According to PitchBook data, BlockFills raised $6 million in 2021 and another $37 million in 2022, with investors including CME Ventures, the venture capital arm of the Chicago Mercantile Exchange Group, and financial firm SIG.

The company’s website also shows that it has over 2,000 institutional clients, with projected trading volume exceeding $61.1 billion in 2025.

Compared to previously collapsed institutions like FTX, Celsius, and Voyager Digital, BlockFills is relatively smaller. FTX had up to 1 million individual users before its collapse, managing assets worth $16 to $24 billion; Celsius had up to 1.7 million individual users before bankruptcy.

From this perspective, the suspension of withdrawals by BlockFills may not cause systemic risk in the crypto industry, but it is still a significant setback.

BlockFills stated that although withdrawals are paused, customers can still open and close positions in spot and derivatives trading. The platform is making continuous efforts to resolve the issue as quickly as possible and will regularly update customers on the latest developments.

(Source: Cailian Press)