Jun 21, 2022 02:32AM ET
By: AnalysisWatch
Celsius's outburst followed the collapse of two other major tokens last month that rattled the crypto sector, which was already under pressure as rising inflation and rising interest rates sparked a flight from stocks and other riskier assets.
On June 18, bitcoin fell below $20,000 for the first time since December 2020. It has dropped by roughly 60% this year.
The total crypto market has collapsed to about $900 billion, down from a record $3 trillion in November.
The collapse has left individual investors around the world bruised and confused.
Many are angry at Celsius. Others vow never to invest in cryptocurrencies again. Some, like Fong, want stricter oversight of the freewheeling sector.
Crypto lenders, like Celsius, offer high interest rates to investors—mostly individuals—who deposit their coins at these sites.
These lenders, who are, in most cases, unregulated, then invest the deposits in the wholesale cryptocurrency market.
Celsius's problems appear to be related to its wholesale crypto investments. As those investments turned sour, the company failed to meet customer redemptions from investors amid the broader crypto market downturn.
Celsius's redemption freeze looked like a small bank closing its doors.
But a traditional bank overseen by regulators would have some form of protection for depositors.
Celsius CEO Alex Mashinsky tweeted on June 15 that the company was operating without interruption, but gave few details on how and when withdrawals would resume.
On Monday, Celsius said it was looking to stabilize its liquidity and operations.
For others, warnings from regulators around the world about the risks of dealing in cryptocurrencies have become a reality.
Regulators in countries around the world are working on how to build cryptocurrency safety fences that can protect investors and reduce risks to broader financial stability.
The Celsius-induced turmoil in the crypto market underscores the urgent need for crypto rules, a U.S. Treasury official said last week.