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 money with its double-digit interest rates along the way.
“I probably made $ 100 a week,” said Fong, a 29-year-old civilian aerospace worker living in the English central city of Derby, in places like Celsius. “That covered my groceries.”
Now, however, Fong’s cryptography, about a quarter of his portfolio, is stuck in Celsius.
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The New Jersey-based cryptocurrency lender froze withdrawals from its 1.7 million customers last week, citing “extreme” market conditions, sparking a sale that wiped out hundreds of billions of dollars in paper value. of cryptocurrencies worldwide. Read more
Fong’s long-term cryptocurrency holdings have dropped by about 30%. “Definitely in a very awkward position,” he told Reuters. “My first instinct is to just take it all away,” he said of Celsius.
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 cause 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 has fallen by about 60%. The global crypto market has shrunk to about $ 900 billion, down from a record $ 3 trillion in November. Read more
The fall has left individual investors around the world bruised and baffled. 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 to low-cost technology and capital that made it easier for individual investors to access cryptography.
“We have this collision of technology for smartphones, commercial applications, cheap money and a highly speculative asset,” he said. “That’s why you’ve seen the meteoric rise and fall.”
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“Walking in the Dark at 2 in the Morning”
Cryptocurrency lenders, such as Celsius, offer high interest rates to investors, most people, who deposit their coins on these sites. These lenders, mostly unregulated, then invest deposits in the wholesale crypto market. Read more
Celsius’ problems seem to be related to his wholesale cryptocurrency investments. As these investments worsened, the company was unable to meet investor customer repayments amid the broader fall in the crypto market. Read more
The freezing of redemption at 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 been investing “to the last part” of its crypto payment checks since 2018, which have accumulated in a five-digit sum. He has $ 30,000 in deposits in Celsius, part of his global cryptocurrency holdings, which earns him $ 40 to $ 100 a week in interest, which he hoped would help him pay off his mortgage.
Just over a week ago, Gee received an email from Celsius saying he couldn’t make withdrawals. “I was just walking in the dark at 2 in the morning, back and forth,” he said.
“I believed in the company,” Gee said. “I don’t feel like losing $ 30,000, especially the money I could have invested in my mortgage.”
Gee said he would continue to use Celsius, saying he was “loyal” to the company and hadn’t had 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 intended to “stabilize our liquidity and operations.”
BARRANDES
For some, the enthusiasm for cryptography does not wane.
“I have seen several cycles of the bear market right now, so I am avoiding any sudden reaction,” said Sumnesh Salodkar, 23, in Bombay, whose cryptocurrencies have fallen but are still in positive territory.
For others, the warnings of regulators around the world about the risks of entering cryptography have come true.
Halil Ibrahim Gocer, a 21-year-old in the Turkish capital, Ankara, said his father’s $ 5,000 cryptocurrency investment has dropped to $ 600 since he was introduced to cryptography.
“Knowledge can only take you so far in cryptography,” Gocer said. “Luck is what matters.”
Another investor, a 32-year-old computer worker in Bombay, said he invested 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 cryptocurrencies,” he said, asking for anonymity.
Regulators in countries around the world have been working on how to build cryptocurrencies that can protect investors and reduce risks for broader financial stability.
The turmoil in the crypto market caused by Celsius highlights the “urgent need” for cryptographic rules, a U.S. Treasury official said last week. Read more
Fong, the British investor who has lost access to his cryptocurrency in Celsius, wants things to change.
“A little regulation would be fine, basically. But then I think it’s a balance,” he said. “If you don’t want too much regulation, that’s 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. Editing by Jane Merriman
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