LONDON/MUMBAI/ANKARA, June 21 (Reuters) – For Jeremy Fong, US crypto lender Celsius was an ideal place to stash his digital currency holdings — while earning some pocket money on the side with its double-digit interest rates.
“I was probably making $100 a week,” said Fong, a 29-year-old civilian aerospace worker who lives in the central English city of Derby at sites like Celsius. “That covered my purchases.”
Now, however, Fong’s crypto — about a quarter of his portfolio — is stuck at 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, spurring a sell-off that wiped hundreds of billions of dollars from the paper value of cryptocurrencies worldwide. Continue reading
Fong’s long-term crypto holdings are now down about 30%. “Definitely in a very uncomfortable position,” he told Reuters. “My first instinct is to just withdraw everything,” he said.
The Celsius explosion followed last month’s collapse of two other major tokens, which rattled an already distressed crypto sector as rising inflation and rising interest rates prompted a flight from stocks and other riskier assets. Continue reading
Bitcoin fell below $20,000 on June 18 for the first time since December 2020. It’s down about 60% this year. The entire crypto market has plummeted to around $900 billion from a record $3 trillion in November. Continue reading
The fall left individual investors around the world hurt and confused. Many are angry at Celsius. Others swear never to invest in crypto again. Some, like Fong, want more oversight of the freewheeling sector.
Hargreaves Lansdown analyst Susannah Streeter compared the turmoil to the dot-com stock crash of the early 2000s — with technology and inexpensive capital making it easy for individual investors to gain 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’ve seen a meteoric rise and fall.”
‘RISING IN THE DARK AT 2 AM’
Crypto lenders like Celsius offer high interest rates to investors – mostly individuals – who deposit their coins with these sites. These lenders, mostly unregulated, then invest deposits in the wholesale crypto market. Continue reading
Celsius’ troubles appear to be related to its crypto major investments. As these investments turned sour, the company was unable to meet investor client repayments amid the broader crypto market slump. Continue reading
The Celsius redemption freeze 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 Celsius freeze was 38-year-old Alisha Gee in Pennsylvania.
Gee has invested “every last bit” of her paychecks in crypto since 2018, which has accumulated to a five-figure sum. She has $30,000 in deposits with Celsius — a portion of her total crypto holdings — and earns her interest of $40 to $100 a week, which she hoped would help her pay off her mortgage.
A little over a week ago, Gee received an email from Celsius saying she was unable to withdraw. “I was just pacing at 2 a.m. in the dark, just back and forth,” she said.
“I believed in the company,” Gee said. “It doesn’t feel good to lose $30,000, especially the one I could have raised on my mortgage.”
Gee said she will continue to use Celsius, saying she is “loyal” to the company and has had no issues before.
Celsius CEO Alex Mashinsky tweeted on June 15 that the company was operating “nonstop,” but gave few details on how or when withdrawals would resume. Celsius said Monday it aims to “stabilize our liquidity and operations.”
For some, the enthusiasm for crypto is unbroken.
“I’ve seen several bear market cycles now, so I avoid any knee-jerk reaction,” said Sumnesh Salodkar, 23, in Mumbai, whose crypto holdings are declining but still in positive territory.
For others, warnings from regulators around the world about the risks of trying crypto have become a reality.
Halil Ibrahim Gocer, a 21-year-old in the Turkish capital Ankara, said his father’s crypto investments have fallen from $5,000 to $600 since he introduced him to crypto.
“Knowledge can only get you so far in crypto,” Gocer said. “Luck counts.”
Another investor, a 32-year-old IT worker in Mumbai, said he has put three-quarters of his savings — several hundred dollars — into crypto. Its value has plummeted by about 70% to 80%.
“This will be my last investment in cryptocurrencies,” he said, requesting anonymity.
Regulators in countries around the world have been working on how to build crypto guard rails that can protect investors and mitigate risks to overall financial stability.
The turmoil in the crypto market triggered by Celsius underscores the “urgent need” for crypto rules, a U.S. Treasury Department official said last week. Continue reading
Fong, the British investor who lost access to his crypto at Celsius, wants things to change.
“A bit of regulation would essentially be good. But I think it’s a balance,” he said. “If you don’t want too much regulation, get this,” he said.
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Reports by Tom Wilson and Elizabeth Howcroft in London, Nupur Anand in Mumbai and Ece Toksabay in Ankara. Editing by Jane Merriman
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