LONDON / MUMBAY / ANKARA, June 21 (Reuters) – For Jeremy Fong, US crypto lender Celsius was the perfect place to hide his holdings in digital currency – and make some money on double-digit interest rates along the way.
“I probably made $ 100 a week,” in sites like Celsius, said Fong, a 29-year-old civilian aerospace worker who lives in the central English city of Derby. “It covered my groceries.”
But now Fong’s cryptocurrency – about a quarter of his portfolio – is stuck in Celsius.
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The New Jersey-based crypto lender froze withdrawals for its 1.7 million customers last week, citing “extreme” market conditions, sparking a sell-off that wiped out hundreds of billions of dollars of the book value of cryptocurrencies worldwide. Read more
Fong’s long-term cryptocurrencies have now fallen by about 30%. “Definitely in a very awkward position,” he told Reuters. “My first instinct is to just pull everything out of Celsius,” he said.
The rise in Celsius followed the collapse of two other major tokens last month, which rocked the crypto sector, which is already under pressure as rising inflation and rising interest rates cause stocks and other riskier assets to flee. Read more
Bitcoin fell below $ 20,000 on June 18 for the first time since December 2020. It fell about 60% this year. The total cryptocurrency market collapsed to about $ 900 billion, down from a record $ 3 trillion in November. Read more
The collapse has left individual investors around the world bruised and confused. Many are angry at Celsius. Others swear never to invest in cryptocurrency again. Some, such as Fong, want stronger oversight of the free movement sector.
Susanne Streetter, an analyst at Hargreaves Lansdown, compares the turmoil to the collapse of dotcom shares in the early 2000s – to technology and cheap capital that make it easier for individual investors to access cryptocurrency.
“We have this clash of smartphone technology, retail applications, cheap money and highly speculative assets,” she said. “That’s why you’ve seen meteorites rise and fall.”
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“STEPPING IN THE DARK AT 2 AM”
Crypto lenders, such as Celsius, offer high interest rates to investors – mostly individuals – who deposit their coins on these sites. These lenders, mostly unregulated, then invest deposits in the wholesale cryptocurrency market. Read more
Celsius’ problems seem to be related to wholesale crypto investment. As these investments deteriorated, the company was unable to meet the buying of customers from investors amid a wider downturn in the crypto market. Read more
Freezing the redemption at Celsius was like a small bank closing its doors. But a traditional bank monitored by regulators would have some form of protection for depositors.
One of those affected by the Celsius freeze was 38-year-old Alicia G in Pennsylvania.
Gee is investing “everything to the last” of his salaries in cryptocurrency since 2018, which accumulated in five figures. She has $ 30,000 in deposits with Celsius – part of her common cryptocurrencies – earning her $ 40- $ 100 a week in interest, which she hoped would help her pay off her mortgage.
A little over a week ago, Ji received an email from Celsius that he could not make withdrawals. “I was just walking in the dark at 2 in the morning, just back and forth,” she said.
“I believed in company,” Gee said. “It’s not good to lose $ 30,000, especially the ones I could invest in my mortgage.”
Ji said she would continue to use Celsius, saying she was “loyal” to the company and had no problems before.
Celsius CEO Alex Maszynski tweeted on June 15 that the company was operating non-stop, but gave little details on how and when the withdrawals would resume. Celsius said Monday that it aims to “stabilize our liquidity and operations.”
PARANETI
For some, the enthusiasm for cryptocurrency is unlimited.
“I have seen several cycles in the bear market so far, so I avoid any knee reaction,” said Sumnesh Salodkar, 23, in Mumbai, whose cryptocurrencies are declining but are still in positive territory.
For others, warnings from regulators around the world about the risks of cryptocurrency have become a reality.
Khalil Ibrahim Gocher, 21, of the Turkish capital, Ankara, said his father’s $ 5,000 cryptocurrency investment has fallen to $ 600 since he introduced him to crypto.
“Knowledge can only get you here in cryptocurrency,” Goser said. “Luck is what matters.”
Another investor, a 32-year-old IT worker in Mumbai, said he had invested three-quarters of his savings – several hundred dollars – in cryptocurrency. Its value has fallen by about 70% -80%.
“This will be my last investment in cryptocurrencies,” he said, wishing to remain anonymous.
Regulators around the world are developing how to build crypto-guardrails that can protect investors and reduce risks to greater financial stability.
The turmoil in the crypto market caused by Celsius underscores the “urgent need” for crypto rules, a US Treasury Department official said last week. Read more
Fong, the UK investor who lost access to his cryptocurrency at Celsius, wants things to change.
“A little regulation would be good, in essence. But then I think it’s a balance,” he said. “If you don’t want too much regulation, that’s what you get,” he said.
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Reports by Tom Wilson and Elizabeth Hawcroft in London, Nupur Anand in Mumbai and Edge Toxabai in Ankara. Edited by Jane Merriman
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