“I probably earned $ 100 a week” in places like Celsius, said Fong, a 29-year-old civil aviation worker living in the town of Derby in central England. “It covered my food expenses.”
But now Fong’s crypto – about a quarter of his wallet – is stuck on Celsius.
The New Jersey-based cryptocurrency lender froze withdrawals for its 1.7 million customers last week, citing “extreme” market conditions, triggering a sale that wiped out hundreds of billions of dollars from cryptocurrencies in paper value globally.
Fong’s long-term crypto portfolio has now fallen by around 30%. “Definitely in a very uncomfortable position,” he told Reuters. “My first instinct is to take everything out” of Celsius, he said.
Celsius’ eruption follows the collapse of two other major tokens last month that shook an already strained crypto sector as runaway inflation and rising interest rates prompted an escape from equities and other more risky assets.
Bitcoin broke below $ 20,000 on June 18 for the first time since December 2020. It has fallen about 60% this year. The overall crypto market plunged about $ 900 billion down from the highest level of $ 3 trillion in November.
The tumble has left individual investors around the world battered and confused. Many are angry at Celsius. Others promise never to invest in crypto again. Some, like Fong, want tighter oversight of this freewheel sector.
Susannah Streeter, an analyst at Hargreaves Lansdown, compared the turmoil to the dotcom stock market crash of the early 2000s – technology and low-cost capital giving retail investors easy access to crypto.
“We have this collision between smartphone technology, trading apps, cheap money and a very speculative asset,” she said. “That’s why you saw a meteoric rise and fall.”
Diagram: Crypto plunger –
“PACING IN THE DARK 2 AM”.
Crypto lenders, like Celsius, offer high interest rates to investors – mostly individuals – who deposit their coins on these sites. These mostly unregulated creditors then invest the deposits in the wholesale crypto market.
Celsius’ problems appear to be related to its wholesale investments in cryptocurrency. When these investments became sour, the company was unable to meet customer redemptions from investors in the midst of the broader meltdown of the crypto market.
The freezing of redemptions on Celsius is similar to the closure of a small bank. But a traditional bank, under the supervision of regulators, would have some form of protection for depositors.
One of those affected by the Celsius freeze was Alisha Gee, 38, of Pennsylvania.
Gee has been investing “every last drop” of its payslips in crypto since 2018, which has accumulated to a five-figure amount. She has $ 30,000 in deposits with Celsius – part of her entire cryptocurrency – and earns her interest of $ 40,100 a week, which she hoped would help pay off her mortgage.
A little over a week ago, Gee received an email from Celsius telling her she could not make payments. “I walked in the dark at 2am and walked back and forth,” she says.
“I believed in the business,” Gee said. “It does not feel good to lose $ 30,000, especially since I could have put it in my mortgage.”
Mrs Gee said she would continue to use Celsius and said she was “loyal” to the company and had not encountered any problems before.
On June 15, Celsius CEO Alex Mashinsky tweeted that the company was “working tirelessly,” but gave few details on how or when withdrawals would resume. Celsius said Monday it is aiming to “stabilize our liquidity and operations”.
For some, the enthusiasm for crypto is intact.
“I have seen several bear market cycles so far so I avoid knee-jerk reactions,” said Sumnesh Salodkar, 23, from Mumbai, whose crypto inventory is down but still in positive territory.
For others, warnings from regulators around the world about the risk of speculating in cryptocurrencies have come true.
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 it to crypto.
“Knowledge can not take you very far in crypto,” Gocer said. “It’s luck that counts.”
Another investor, a 32-year-old Mumbai IT employee, said he had about three-quarters of his savings – several hundred dollars – in crypto. Its value has fallen by about 70-80%.
“This will be my last investment in cryptocurrency,” he said, asking for anonymity.
Regulators in countries around the world have been considering how to build cryptocurrencies that can protect investors and reduce risks to broader financial stability.
The turmoil in the cryptocurrency market triggered by Celsius underscores the “urgent need” for rules on cryptocurrencies, a US Treasury Department official said last week.
Fong, the British investor who lost access to his crypto at Celsius, wants things to change.
“A little regulation would basically be good. But then I think it’s a balance,” he said. “If you do not want too much regulation, that’s what you get,” he added.