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Celsius allows users to deposit a range of cryptocurrencies in return for interest rates far greater than banks offer.Credit:Bloomberg

“We are taking this necessary action for the benefit of our entire community in order to stabilise liquidity and operations while we take steps to preserve and protect assets,” reads the statement from Celsius,which was valued at $US3.25 billion ($4.6 billion) in a capital raise late last year.

It said it had"valuable assets",was working to meet commitments,and customers would continue to accrue"awards"during the freeze.

Bitcoin and Ethereum,which have been pummelled this year amid a wider technology stock rout caused by rising inflation and interest rates along with the end of pandemic stimulus,both fell sharply on the news and continued falling overnightas part of a wider retreat on equities markets. At 5am AEST on Tuesday,Bitcoin has shed 16 per cent over the past day to be trading at around $US23,200 and Ether is 18.5 per cent lower at $US1,226.

Celsius’ move echoes the recent collapse of another cryptocurrency project known as Terra/Luna. While the two differ in many respects,they are similar in that many people bought into Terra/Luna because they could access interest rates of 20 per cent. Celsius offers up to 18 per cent annualised interest for deposits of some tokens and time periods on its platform.

Even as it froze withdrawals,Celsius was still promising users elsewhere on its site that they could"swap or withdraw your crypto at any time,with no fees"and that they were"safe forever".

It takes bitcoin’s losses this year to about 45 per cent,according to data from Morningstar,while Ethereum is down about 63 per cent.

Critics accuse the crypto ecosystem of promoting tokens with little or no inherent value,making them highly speculative assets that are ripe for swift falls when market sentiment sours,along with bank-run style exoduses on the platforms that support them.

Believers,meanwhile,insist that crypto systems will allow finance to be decentralised,helping to protect consumers from banks amid other boons over the long term.

Celsius has previously adopted a dismissive approach to sceptics. It released a statement less than a week ago,on June 8,entitled,“Damn the Torpedoes,Full Speed Ahead.”

"At this already challenging time,it’s unfortunate that vocal actors are spreading misinformation and confusion,"the statement read."They have tried unsuccessfully,for example,to link Celsius to the collapse of Luna and falsely claim that Celsius sustained significant losses as a result."

The Terra/Luna project,along with a lending protocol called Anchor,was supposed to be a safe way for users to earn large interest rates because it contained a “stablecoin” that was meant to be exchangeable for US dollars at a one-to-one rate. When that peg was broken by large sell-offs,users panicked and fled,resulting in a bank-run style situation that caused hyperinflation of another token and the ultimate devaluation of the whole project.

By 5am AEST on Tuesday,Celsius’ own crypto token was down about 25 per cent for the day,making it worth about 33 US cents,though it had gone as low as 60 per cent. A year ago,it was worth more than $US7.

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