Crypto Investors Left Concerned Amid Meltdown

Investors left in a panic after Celsius suspends withdrawals from its platform.

FILE PHOTO: Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, February 14, 2018. REUTERS/Dado Ruvic/File Photo
FILE PHOTO: Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, February 14, 2018. REUTERS/Dado Ruvic/File Photo
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LONDON (Bywire News) - Not so long ago, Celsius was a trusted part of the crypto economy; or at least that’s what people like Jeremy Fong believed. He was one of those who believed it was the perfect platform to store his holdings in an attempt to earn additional yield from the double-digit interest rates Celsius promised. 

For a long time, things went well. Fong, a 29-year civil aerospace worker living in Derby claims that through sites such as Celsius he was earning, "$100 a week," – enough to buy his groceries. 

However, with Celsius’ recent announcement that it would be halting withdrawals due to market conditions almost a quarter of his crypto portfolio is stuck at Celsius. He is among 1.7 million customers who had had their funds frozen. The announcement from Celsius is blamed for a sell-off which wiped hundreds of billions of dollars from the crypto market.

Fong and his fellow investors have been looking at an uncomfortable equation. His long-term holdings are down an estimated 30% putting him in what he describes as an ‘uncomfortable position. “My first instinct,” he says, “is just to withdraw everything." 

Problems with Celsius came after the collapse of major tokens $UST and $LUNA last month. Struggling under the weight of rising inflation and economic insecurity, major cryptocurrencies have been in a nosedive. Bitcoin has dropped below $20,000 for the first time since December 2020 – a 60% drop this year alone. Overall, the market has fallen to around $900bn – a world away from the $3 trillion heights seen in November. 

Anger at the actions of Celsius adds to the general feeling of confusion and fear spreading across the crypto sphere. Many have vowed never to get involved again. Others, though, like Fong want to see tighter restrictions. 

For Susannah Streeter, an analyst at Hargreaves Lansdown, the current crisis has echoes of the dotcom crash of the early 2000s. 

"We've got this collision of smartphone technology, trading apps, cheap money and a highly speculative asset," she added. "That's why you've seen a meteoric rise and fall."

Unregulated crypto lenders such as Celsius offer high interest to investors who deposit their cryptocurrency on these sites in return for a yield. Lenders then use investors' deposits in the crypto markets. 

In good times, it was a successful business model, but as the last week has shown, it was fatally vulnerable to a bear market. Celsius found itself unable to meet depositors’ redemptions forcing them into desperate measures. Freezing withdrawals can be compared to a bank shutting its doors. The difference is that regulated institutions such as banks would have contingency measures in place to protect the interests of investors. In the wild west world of crypto, that’s not the case. 

Another victim of the Celsius freeze is 38-year-old investor Alisha Gee from Pennsylvania. She had put ‘every last bit’ of her paycheques into cryptocurrency since 2018 resulting in five-figure gains. With $30,000 deposited with Celsius, she hoped to earn interest of $40-$100 a week hoping to help her pay off her mortgage. To her, the news was devastating.

After receiving an email saying she was unable to make withdrawals, Gee said "I just was pacing in the dark at 2 a.m., just back and forth," 

"I believed in the company,” she said, "It doesn't feel good to lose $30,000, especially that I could've put towards my mortgage."

Even so, she claims, she would continue to use Celsius as she was “loyal” to the company and hadn’t experienced any problems before.

CEO of Celsius Alex Mashinsky tweeted that the company was "working non-stop," to resolve the problems, but failed to give substantial details on the resumption of withdrawals. On Monday, Celsius claimed they were aiming to "stabilize our liquidity and operations."

Halil Ibrahim Grocer,21, in Istanbul, said his father’s crypto investment of $5,000 has dropped to $600 since he’d introduced him to the new asset class. 

"Knowledge can only take you so far in crypto," said Grocer. "Luck is what matters."

Meanwhile, a 32-year-old IT worker in Mumbai who invested three-quarters of his savings into crypto added that its value has dropped around 70%-80%.

Requesting anonymity, he said “This will be my last investment in cryptocurrencies,"

Despite the panic, some crypto enthusiasts remain positive. 

"I have seen multiple bear market cycles by now, so I am avoiding any knee-jerk reaction," Sumnesh Salodkar added, a 23-year-old investor whose holdings are down but still in some profit.

Taming the wild west of finance

Regulators across the world have made a conscious effort to make people aware of the risks of investing in crypto. Global regulators have been working to establish coherent frameworks which encourage innovation while protecting customers. 

The collapse of Terra and Celsius has sparked comments from U.S. Treasury officials claiming the events highlight an “urgent need" for crypto regulations.

Fong, for his part, agrees. 

"A bit of regulation would be good, essentially. But then I think it's a balance," he said. "If you do not want too much regulation, this is what you get" he concluded.

(Writing by Samba Jallow, editing by Tom Cropper and Klaudia Fior)

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