For Jeremy Fong, US crypto lender Celsius was a great place to store his digital currency holdings – and earn pocket money from his double-digit interest rates along the way.
“I was probably making $100 a week,” on sites like Celsius, said Fong, a 29-year-old civil aerospace worker who lives in the city of Derby in central England. “That covered my runs.”
Now, however, Fong’s crypto – about a quarter of his wallet – is locked at Celsius.
The New Jersey-based crypto lender froze withdrawals for its 1.7 million customers last week, citing “extreme” market conditions, prompting a sell-off that wiped hundreds of billions of dollars off the paper value of crypto -currencies in the world.
Fong’s long-term crypto holdings are now down around 30%. “Certainly in a very uncomfortable position,” he told Reuters. “My first instinct is just to take everything out,” from Celsius, he said.
Celsius’ outburst followed the crash of two other major tokens last month that rattled an already strained crypto sector as soaring inflation and rising interest rates prompt equities to flee. and other higher risk assets.
Bitcoin fell below $20,000 on June 18 for the first time since December 2020. It has fallen around 60% this year. The overall crypto market crashed to around $900 billion from a record high of $3 trillion in November.
The fall left individual investors around the world bruised and bewildered. Many are angry with Celsius. Others vow never to invest in crypto again. Some, like Fong, want stronger oversight of the freewheeling sector.
Susannah Streeter, an analyst at Hargreaves Lansdown, compared the turmoil to the dotcom stock crash of the early 2000s – with technology and low-cost capital allowing retail investors easy access to crypto.
“We have this collision of smartphone technology, trading apps, cheap money and a highly speculative asset,” she said. “That’s why you saw a meteoric rise and fall.”
“Packing in the dark at 2 a.m.”
Crypto lenders, such as Celsius, offer high interest rates to investors – mostly individuals – who deposit their coins on these sites. These mostly unregulated lenders then invest deposits in the wholesale crypto market.
Celsius’ problems appear to be related to its wholesale crypto investments. As these investments turned sour, the company was unable to meet customer buyouts by investors amid the general crypto market crash.
The takeover freeze at Celsius was like 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 Celsius freeze was Alisha Gee, 38, in Pennsylvania.
Gee has invested “every last chunk” of his paychecks in crypto since 2018, which have accumulated to a five-figure sum. She has $30,000 in deposits with Celsius — part of her overall crypto holdings — earning her interest of $40 to $100 a week, which she hoped would help her pay off her mortgage.
Just over a week ago, Gee received an email from Celsius saying she couldn’t make withdrawals. “I was pacing in the dark at 2 a.m., just back and forth,” she said.
“I believed in the business,” Gee said. “It doesn’t feel good to lose $30,000, especially since I could have put it on my mortgage.”
Gee said she would continue to use Celsius, saying she was “loyal” to the company and had never encountered any issues before.
Celsius CEO Alex Mashinsky tweeted on June 15 that the company was “working non-stop,” but gave few details on how and when withdrawals would resume. Celsius said on Monday it aimed to “stabilize our liquidity and operations.”
For some, the enthusiasm for crypto is undimmed.
“I’ve seen several bear market cycles before, so I’m avoiding any knee-jerk reaction,” said Sumnesh Salodkar, 23, in Mumbai, whose crypto holdings are down but still in positive territory.
For others, warnings from regulators around the world about crypto risks have come true.
Halil Ibrahim Gocer, a 21-year-old in the Turkish capital Ankara, said his father’s crypto investments of $5,000 have dropped to $600 since he introduced him to crypto.
“Knowledge can only take you so far in crypto,” Gocer said. “Luck is what counts.”
Another investor, a 32-year-old computer scientist in Mumbai, said he invested three-quarters of his savings – several hundred dollars – in crypto. Its value has dropped by about 70-80%.
“This will be my last cryptocurrency investment,” he said on condition of anonymity.
Regulators in countries around the world have been working on how to build crypto guardrails that can protect investors and mitigate risk for broader financial stability.
The turmoil in the crypto market caused by Celsius highlights the “urgent need” for crypto rules, a US Treasury official said last week.
Fong, the British investor who lost access to his crypto at Celsius, wants things to change.
“A little bit of regulation would be good, basically. But I think it’s a balance,” he said. “If you don’t want too much regulation, that’s what you get,” he said.
(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)
Denial of responsibility! newsnaveen.online is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – email@example.com. The content will be deleted within 24 hours.