Crypto’s latest meltdown leaves punters bruised and bewildered


LONDON / MUMBAI / ANKARA, June 21 (Reuters) – For Jeremy Fong, US crypto lender Celsius was a great place to save its digital currency holdings and make some money with its double-digit interest rates over way.

“I probably made $ 100 a week,” in places like Celsius, said Fong, a 29-year-old civilian aerospace worker living in the central English city of Derby. “That covered my groceries.”

Now, however, Fong’s cryptocurrency, about a quarter of its portfolio, is trapped in Celsius.

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The New Jersey-based cryptocurrency lender froze the withdrawals of its 1.7 million customers last week, citing “extreme” market conditions, prompting a liquidation that removed hundreds of billions of dollars from the paper’s value. cryptocurrencies worldwide. Read more

Fong’s long-term cryptocurrency holdings have now dropped 30%. “Definitely in a very awkward position,” he told Reuters. “My first instinct is to just pull everything out,” Celsius said.

The Celsius explosion followed the collapse of two other major tokens last month that shook a cryptocurrency sector that was already under pressure as rising inflation and rising interest rates lead to a flight of stocks and other higher-risk assets. Read more

Bitcoin fell below $ 20,000 on June 18 for the first time since December 2020. This year it plummeted by around 60%. The global crypto market fell to about $ 900 billion, below a record $ 3 trillion in November. Read more

The fall has left individual investors around the world hurt and bewildered. Many are angry with Celsius. Others swear never to invest in crypto again. Some, like Fong, want stronger oversight of the freewheeling industry.

Susannah Streeter, an analyst at Hargreaves Lansdown, compared the turmoil to the fall in dot-com stocks in the early 2000s, with the low-cost technology and capital that makes it easier for individual investors to access crypto.

“We have this collision of smartphone technology, business apps, cheap money and a highly speculative asset,” he said. “That’s why you’ve seen meteoric ups and downs.”

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“STEP IN THE DARK AT 2 AM”

Cryptographic lenders, such as Celsius, offer high interest rates to investors, mostly individuals, who deposit their coins on these sites. These lenders, mostly unregulated, invest deposits in the wholesale crypto market. Read more

Celsius’ problems seem to be related to his wholesale cryptocurrency investments. As these investments deteriorated, the company was unable to meet customer bailouts of investors amid the widest fall in the crypto market. Read more

The freezing of redemption in Celsius was like a small bank closing its doors. But a traditional bank, overseen by regulators, would have some sort of protection for depositors.

One of those affected by the Celsius freeze was Alisha Gee, 38, of Pennsylvania.

Gee has invested “to the last” in its crypto payment checks since 2018, which have accumulated in a five-digit sum. She has $ 30,000 in Celsius deposits, part of her general cryptocurrency holdings, that earn her $ 40 to $ 100 a week in interest, which she hoped would help her pay off her mortgage.

Just over a week ago, Gee received an email from Celsius saying he couldn’t make withdrawals. “I was walking in the dark at 2am, just back and forth,” he said.

“I grew up in the business,” Gee said. “I don’t feel like losing $ 30,000, especially the ones I was able to spend on my mortgage.”

Gee said he would continue to use Celsius, saying he was “loyal” to the company and had not experienced any problems before.

Celsius CEO Alex Mashinsky tweeted on June 15 that the company was “working non-stop,” but gave little details on how or when the withdrawals would resume. Celsius said Monday it aimed to “stabilize our liquidity and operations.”

BARANDAS

For some, the enthusiasm for cryptography is not diminished.

“I have seen several cycles of bear market so far, so I am avoiding any knee reaction,” said Sumnesh Salodkar, 23, in Mumbai, whose cryptocurrencies have fallen but still in positive territory.

For others, warnings from regulators around the world about the risks of venturing into cryptography have come true.

Halil Ibrahim Gocer, a 21-year-old in the Turkish capital, Ankara, said his father’s $ 5,000 cryptocurrency investment had dropped to $ 600 since he was introduced to cryptography.

“Knowledge can only take you so far in crypto,” Gocer 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 plummeted by 70% -80%.

“This will be my last investment in cryptocurrencies,” he said, requesting anonymity.

Regulators in countries around the world have been working to build cryptocurrencies that can protect investors and reduce risks for broader financial stability.

Celsius’ cryptocurrency market turmoil highlights the “urgent need” for cryptographic rules, a U.S. Treasury official said last week. Read more

Fong, the British investor who lost access to his cryptocurrency in Celsius, wants things to change.

“A little regulation would be fine, essentially. But then I think it’s a balance,” he said. “If you don’t want too much regulation, this is what you get,” he said.

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Report by Tom Wilson and Elizabeth Howcroft in London, Nupur Anand in Bombay and Ece Toksabay in Ankara. Edited by Jane Merriman

Our standards: the trustworthy principles of Thomson Reuters.



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