LONDON / MUMBAI / ANKARA, June 21 (Reuters) – For Jeremy Fong, the US cryptocurrency lender Celsius was an ideal place to hide his digital currency holdings – and make some money on double-digit interest rates along the way.
“I probably made $ 100 a week,” in places like Celsius, said Fong, a 29-year-old civilian space worker living in the central English city of Derby. “It covered my groceries.”
Now, however, Fong’s crypto – about a quarter of his portfolio – is fixed on Celsius.
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The New Jersey-based cryptocurrency lender froze withdrawals for its 1.7 million customers last week, citing “extreme” market conditions, which spurred a sale that removed hundreds of billions of dollars from the paper value of cryptocurrencies globally. read more
Fong’s long-term crypto portfolio is now down around 30%. “Definitely in a very uncomfortable position,” he told Reuters. “My first instinct is just to withdraw everything,” he said of Celsius.
The Celsius explosion followed the collapse of two other major tokens last month that shook a crypto sector that was already under pressure as soaring inflation and rising interest rates led to a flight from stocks and other higher-risk assets. read more
Bitcoin fell below $ 20,000 on June 18 for the first time since December 2020. It has plunged around 60% this year. The total crypto market has fallen to around $ 900 billion, down from a record high of $ 3 trillion in November. read more
The fall has left individual investors around the world battered and confused. Many are angry at Celsius. Others swear never to invest in crypto again. Some, like Fong, want stronger supervision of the freewheel sector.
Susannah Streeter, an analyst at Hargreaves Lansdown, compared the turmoil to dotcom stock crashes in the early 2000s – with technology and low-cost capital making it easy for individual investors to access crypto.
“We have this collision of smartphone technology, trading apps, cheap money and a very speculative resource,” she said. “That’s why you’ve seen a meteoric rise and fall.”
‘PACING IN THE DARK AT 2 AM’
Crypto-borrowers, 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 crypto market. read more
Celsius’ problems appear to be related to wholesale cryptocurrencies. As these investments became sour, the company was unable to meet client redemptions from investors in the midst of the broader downturn in the crypto market. read more
The redemption stop at Celsius was akin to a small bank closing its doors. But a traditional bank, overseen by regulators, would have some form of protection for depositors.
One of those affected by the freezing point in Celsius was 38-year-old Alisha Gee in Pennsylvania.
Gee invested “every last bit” of her paychecks in crypto since 2018, which has built up to a five-digit sum. She has a $ 30,000 deposit on Celsius – part of her total cryptocurrency – which earns her an interest rate of $ 40- $ 100 a week, which she hoped would help her pay off her mortgage.
Just over a week ago, Gee received an e-mail from Celsius stating that she could not make a withdrawal. “I just walked in the dark at 2am, just back and forth,” she said.
“I believed in the company,” Gee said. “It does not feel good to lose $ 30,000, especially what I could have spent on my mortgage.”
Gee said she would continue to use Celsius, saying she was “loyal” to the company and had not experienced problems before.
Celsius CEO Alex Mashinsky tweeted on June 15 that the company “works non-stop”, but has given few details on how or when withdrawals would resume. Celsius said on Monday that it aimed to “stabilize our liquidity and operations.”
For some, the enthusiasm for crypto is unbridled.
“I’ve seen several bear market cycles now, so I avoid any knee-jerk reactions,” said 23-year-old Sumnesh Salodkar of Mumbai, whose crypto stock is down but still in positive territory.
For others, warnings from regulators around the world about the risk of wallowing in crypto have become a reality.
Halil Ibrahim Gocer, a 21-year-old in the Turkish capital Ankara, said his father’s $ 5,000 crypto investment has dropped to $ 600 since he introduced him to crypto.
“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 spent three-quarters of his savings – several hundred dollars – on crypto. The value has fallen by around 70–80%.
“This will be my last investment in cryptocurrencies,” he said, asking for anonymity.
Regulators in countries around the world have worked out how to build crypto-railings that can protect investors and mitigate the risk of greater financial stability.
The turmoil in the crypto market triggered by Celsius highlights the “urgent need” for crypto rules, a US Treasury Secretary said last week. read more
Fong, the British investor who has lost access to his cryptographer at Celsius, wants things to change.
“A little regulation would be good, really. But then I think there’s a balance,” he said. “If you do not want too much regulation, this is what you get,” he said.
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Reporting by Tom Wilson and Elizabeth Howcroft in London, Nupur Anand in Mumbai and Ece Toksabay in Ankara. Edited by Jane Merriman
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