LONDON/MUMBAI/ANKARA (Reuters) – For Jeremy Fung, US crypto lender Celsius was an ideal place to store his crypto holdings — and earn some of the money you spend from double-digit interest rates along the way.
“I was probably making $100 a week” at sites like Celsius, said Fong, 29, a civil aviation worker who lives in Derby, central England. “That covered my groceries.”
Now, though, Fong’s crypto – about a quarter of his wallet – is stuck at a Celsius.
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A New Jersey crypto lender froze the withdrawals of 1.7 million of its clients last week, citing “harsh” market conditions, leading to a selloff that wiped out hundreds of billions of dollars in fiat value of cryptocurrencies globally. Read more
Fong’s long-term cryptocurrency holdings are down around 30%. “Definitely in a very uncomfortable situation,” he told Reuters. “My first instinct is to just pull it all off,” he said.
The centenary explosion came on the heels of the collapse of two other major coins last month, which shook the crypto sector already under pressure, as soaring inflation and rising interest rates sent stocks and other risky assets fleeing. Read more
Bitcoin fell below $20,000 on June 18 for the first time since December 2020. It has fallen nearly 60% this year. The overall crypto market has fallen to around $900 billion, down from a record $3 trillion in November. Read more
The crash has left retail investors around the world bruised and bewildered. Many are angry at Celsius. Others swear never to invest in cryptocurrencies again. Some, like Fong, want stronger oversight of the freedom of movement sector.
Susanna Streeter, an analyst at Hargreaves Lansdown, compared the turmoil to the collapse of internet stocks in the early 2000s — with technology and low-cost capital making it easier for individual investors to access cryptocurrency.
“We have this collision of smartphone technology, trading apps, cheap money, and highly speculative assets,” she said. “That’s why I saw meteorite ups and downs.”
“Move in the dark at 2 AM”
Cryptocurrency lenders such as Celsius offer high interest rates to investors – mostly individuals – who deposit their coins at these sites. These lenders, mostly unregulated, invest deposits in the wholesale crypto market. Read more
Celsius’ problems appear to be related to its wholesale crypto investments. With these investments faltering, the company has been unable to meet customer refunds from investors amid the broader slump in the cryptocurrency market. Read more
Freezing the recovery at 1°C was like a small bank closing its doors. But a conventional bank, which is overseen by regulators, will have some form of protection for depositors.
Among those affected by the centenary freeze is 38-year-old Alisha Gee in Pennsylvania.
Gee has invested “every last bit” of her paycheck into crypto since 2018, which has accumulated in the five-figure sum. She has $30,000 in Celsius deposits — part of her total cryptocurrency holdings — from which she earns between $40 and $100 in interest a week, which she hopes will help her pay off her mortgage.
A little over a week ago, Ji received an email from Celsius saying she couldn’t make withdrawals. “I was walking in the dark at two in the morning, going back and forth,” she said.
“I believe in the company,” Gee said. “It’s not a good idea to lose $30,000, especially since I could have paid off my mortgage.”
Gee said she will continue to use the degree, saying she is “loyal” to the company and has never had problems before.
Celsius CEO Alex Mashinsky tweeted on June 15 that the company was “working nonstop,” but provided few details about how and when it would resume withdrawals. Celsius said Monday that it aims to “stabilize our liquidity and operations.”
For some, enthusiasm for cryptocurrency is not distorted.
“I have seen several bear market cycles so far, so I am avoiding any unexpected reaction,” said Sumnesh Salodkar, a 23-year-old in Mumbai, whose cryptocurrency holdings are tumbling but still in positive territory.
For others, warnings from regulators around the world about the dangers of diving into cryptocurrency have become a reality.
Khelil Ibrahim Gucer, a 21-year-old in the Turkish capital of Ankara, said his father’s $5,000 crypto investment has fallen to $600 since he introduced him to cryptocurrency.
“Knowledge can take you so far in crypto,” Joser said. “Luck is what matters.”
Another investor, a 32-year-old IT worker in Mumbai, said he poured three-quarters of his savings — several hundred dollars — into cryptocurrencies. Its value decreased by about 70%-80%.
“This will be my last investment in cryptocurrency,” he said, who asked not to be identified.
Regulators in countries around the world are working on how to build safeguards for cryptocurrencies that can protect investors and reduce risks to broader financial stability.
Last week, a US Treasury official said that the crypto market turmoil sparked by the Percentage Score highlights an “urgent need” for crypto-regulation. Read more
Fong, a British investor who lost access to Celsius’ cryptocurrency, wants things to change.
“A little bit of regulation would basically be good,” he said. “But then I think it’s a balance.” “If you don’t want a lot of organization, this is what you get,” he said.
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Additional reporting by Tom Wilson and Elizabeth Hawcroft in London, Nupur Anand in Mumbai and Es Toksabai in Ankara. Editing by Jane Merriman
Our criteria: Thomson Reuters Trust Principles.
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