For Jeremy Fong, US crypto lender Celsius was an ideal place to stash his digital currency holdings -- and earn some spending money from its double-digit interest rates along the way. “I was probably earning $100 a week,” at sites like Celsius, said Fong, a 29-year-old civil aerospace worker who lives in the central English city of Derby. “That covered my groceries.”
For the latest headlines, follow our Google News channel online or via the app.Now, though, Fong’s crypto -- about a quarter of his portfolio -- is stuck at Celsius.
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 the cryptocurrencies globally.Fong’s long-term crypto holdings are now down about 30 percent.
“Definitely in a very uncomfortable position,” he told Reuters. “My first instinct is just to withdraw everything,” from Celsius, he said.
The Celsius blow-up followed the collapse of two other major tokens last month that shook a crypto sector already under pressure as soaring inflation and rising interest rates prompt a flight from stocks and other higher-risk assets. Bitcoin fell below $20,000 on June 18 for the first time since December 2020. It has plummeted around 60 percent this year.
The overall crypto market has slumped to around $900 billion, down from a record $3 trillion in November.The tumble has left individual investors across the world bruised and bewildered. Many are angry at Celsius. Others swear 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 dotcom stocks crash in the early 2000s -- with technology and low-cost capital making it easy for individual investors to gain access to crypto.“We’ve got 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.”
Crypto lenders, such as Celsius, offer high interest rates toinvestors -- mostly individuals -- who deposit their coins with these sites. These lenders, mostly unregulated, then invest deposits in the wholesale crypto market.Celsius’ troubles appear to be related to its wholesale crypto investments. As these investments turned sour the company was unable to meet client redemptions from investors amid the broader crypto market slump.
The redemption freeze at Celsius was akin to a small bank shutting its doors. But a traditional Gee invested “every last bit” of her paycheques in crypto since 2018, which have built up into a five-figure sum. She has $30,000 of deposits at Celsius -- part of her overall crypto holdings -- earning her interest of $40-$100 a week, which she hoped would help her to pay off her mortgage.bank, overseen by regulators, would have some form of protection for depositors.