Por Tom Wilson e Elizabeth Howcroft e Nupur Anand e Ece Toksabay
LONDON/MUMBAI/ANKARA (Reuters) – For Jeremy Fong, U.S. cryptocurrency financier Celsius was the ideal place to accumulate his digital currency holdings and cash in on its double-digit interest rates.
“I was probably making $100 a week” on sites like Celsius, said Fong, who works in the aerospace industry and lives in Derby, England. “That covered my grocery shopping.”
Now, however, Fong’s digital assets, which make up a quarter of his portfolio, are stuck on Celsius after the cryptocurrency finance company froze withdrawals from its 1.7 million customers last week, citing “extreme” market conditions. The withdrawal ban spurred a liquidation that wiped out hundreds of billions of dollars from the value of cryptocurrencies around the world.
Fong’s long-term cryptocurrency holdings are down about 30%. “I’m definitely in a very uncomfortable position,” he told Reuters. “My first instinct is to just cash it out” from Celsius, he said.
The Celsius implosion followed the collapse of two other key digital assets last month that rocked an already under pressure cryptocurrency sector, as rising inflation and rising interest rates prompted a flight from equities and other higher-value assets. risk.
Bitcoin fell below $20,000 on June 18 for the first time since December 2020. The world’s most important digital currency has lost about 60% this year. The overall cryptocurrency market has dropped to around $900 billion, down from a record $3 trillion set in November.
The collapse of cryptocurrencies has left individual investors around the world hurt and confused. Many are angry at Celsius. Others vow never to invest in digital currencies again. Some, like Fong, want stronger oversight over the industry.
Susannah Streeter, an analyst at Hargreaves Lansdown, likened the turmoil to the dot-com stock crash in the early 2000s — with technology and low-cost capital making it easier for individual investors to access cryptocurrencies.
“We have this collision of smartphone technology, trading apps, cheap money and a highly speculative asset,” she said. “That’s why you saw a meteoric rise and fall.”
“WALKING IN THE DARK AT 2 AM”
Cryptocurrency banks such as Celsius offer high interest rates to investors – particularly individuals – who deposit their coins on these sites. These mostly unregulated companies then invest in the wholesale cryptocurrency market.
The freezing of withdrawals promoted by Celsius was akin to a small bank closing its doors. But a traditional bank, overseen by regulators, would have some form of protection for customers.
One of those affected by the suspension of Celsius withdrawals was Alisha Gee, 38, who has invested “every penny” of her salary in cryptocurrencies since 2018, which have accumulated to a five-figure sum. She has $30,000 in deposits at Celsius — part of her overall cryptocurrency portfolio — earning $40 to $100 a week in interest, which she hoped would help her pay off her mortgage.
Just over a week ago, Gee received an email from Celsius saying she couldn’t make any more withdrawals. “I found myself walking around in the dark at 2am, just back and forth,” she said.
“I believed in the company,” Gee said. “It’s not good to lose $30,000, especially since I could pay my mortgage.”
Celsius Chief Executive Alex Mashinsky wrote on Twitter on June 15 that the company was “working around the clock” but gave few details on how or when customers could access its resources. On Monday, the company said it aimed to “stabilize our liquidity and operations.”
For some, enthusiasm for cryptocurrencies has not abated. “I’ve seen multiple bear market cycles so far, so I’m avoiding any sudden reactions,” said Sumnesh Salodkar, 23, a resident of the Indian city of Mumbai whose cryptocurrency portfolio has racked up losses but is still in positive territory.
For others, warnings from regulators around the world about the risks of getting involved in cryptocurrencies have come true.
Halil Ibrahim Gocer, a 21-year-old in the Turkish capital Ankara, claimed that his father’s $5,000 cryptocurrency investments are now at $600 since he introduced him to the market.
Regulators in countries around the world are working on how to build cryptocurrency protections that can protect investors and lessen risks for broader financial stability.
“Knowledge can only get you so far in cryptocurrencies,” said Gocer. “Luck is what matters.”
Another investor, an information technology industry worker in Mumbai, claimed that he invested 75% of his savings, several hundred dollars, in cryptocurrencies. The value has plummeted about 70% to 80%.
“This is going to be my last cryptocurrency investment,” he said, asking not to be named.
Regulators in countries around the world have been working on building investor protections and reducing risks to the stability of the broader financial system.
The turmoil in the cryptocurrency market sparked by Celsius highlighted the “urgent need” for regulation for cryptocurrencies, a US Treasury official said last week.
Fong, the British investor who lost access to his money at Celsius, wants change.
“A little bit of regulation would be nice…But I think it’s about balance,” he said. “If you don’t want too much regulation, this is what you get,” he said.