Crypto Platform Celsius Pauses Withdrawals
blog.celsius.network
blog.celsius.network
This is like a junk bond. You get a high yield in exchange for a risk of loss of the principal. So junk bonds require due diligence to price. You don't buy just one kind; you buy a diversified collection in hopes that they don't all go bust at once. In 2008, mortgage-backed securities did all go bust at once.
In crypto land these things are blind pools. Customers have no idea where the pool operator is investing, and to what risks they are exposed. This is why there is a requirement for SEC registration.
That's if it's honest. It might be an out and out Ponzi, like Madoff's.
What the crypto crowd does not seem to get is that none of this is new. These are all old ideas in finance. In the 1920s, retail investors were being offered similar blind pools.
Downside's goal is to remind people that we're experiencing a financial bubble, and that financial bubbles always burst. (We originally wrote that in April, 2000. Any questions?)
And here we are, living through another huge bubble.
There really needs to be more oversight on what these funds invest in.
Looks like they put around $200M into Celsius which is about 0.06% of their AUM.
Numbers might not be totally accurate but order of magnitude shows the scale of these funds and how they choose high risk to try and get some return for their beneficiaries.
(Note: I'm not condoning investment into Celsius/crypto in general; just making a point on the investment scale)
If you've been sat in high quality government bonds for the last 15 years then you've basically made nothing, or even a loss, in real (inflation adjusted terms).
My pension fund is in 100% global equity. I've got no choice if I want to retire at a sensible age.
'We have a long-term horizon', which in this context can easily translate into 'by the time this blows up everyone responsible will have long left the company / vested their bonuses' is hardly better.
The only good justification for doing high risk investments is 'our investors know, they understand the risks and they want us to do this'.
When you manage hundreds of billions you need to diversify your investments across asset classes and risk profiles. Putting 1% into high risk VC funds makes a lot of sense.
This is factually incorrect. Celsius' addresses are publicly tagged on Etherscan[1], and everyone can see exactly where they are investing, just like most other 'pools' of the sort. Celsius Network is also SEC registered[2].
1. https://etherscan.io/address/0x8aceab8167c80cb8b3de7fa6228b8...
Their loan system isn't registered as a security. They even say "Earn accounts have not been registered under the Securities Act and may not be offered or sold in the United States, to U.S. persons, for the account or benefit of a U.S. person or in any jurisdiction in which such offer would be prohibited." But not prominently on their home page.
They will get to explain to the SEC why they have the US toll-free number "1-866-HODL-NOW" and are on the Apple Play Store for the US.
Yes, you can look at their transaction log, but it's doesn't tell you all that much. 7 hours ago, they sent 50,000 ETH to somebody.[1] Some people are "paused" less than others, apparently. Someone noted this on Twitter[2]
[1] https://etherscan.io/tx/0xf9e0788094c0bbfdc61ed2fbcf79dfcd4d...
[2] https://twitter.com/btcinchina/status/1536186927707066368
More like a HYIP feeder fund, and considering reports that they were investing in things like Luna/Anchor it sounds like a fair description.
Madoff had feeder funds too, they're critical to reach the entire market-- as there are people who won't invest in the HYIPs directly but will once they've been laundered through a middleman who reduces the yield, making them somewhat more plausible.
Ironically, just as the pension plan announced its investment, the provincial securities regulator announced that they're investigating Celsius for violating securities laws.
Just an embarrassment of a situation overall... Details here (in French): https://ici.radio-canada.ca/recit-numerique/4095/caisse-depo...
Yikes.
Most fund managers would be fired, or quit, but because it's Green(TM), it was fine and good.
https://www.thestar.com/business/2021/09/28/canadas-oil-indu...
The take away for all Canadians (the CPP is just as bad) is that these pension funds are just one more tax. You will be paid out, just nowhere near commensurate with what you put in.
And that's even before the comical "inflation" adjustments and the intentional lack of currency hedge.
Will there be riots over the mismanagement of the wealth of millions of people? How much have these incompetent managers destroyed? Esg is a cancer to society.
https://en.wikipedia.org/wiki/Ontario_Teachers'_Pension_Plan
Canadian Pensions like OTPP are run more like private equity funds and they compensate their employees the same way in order to compete in terms of talent in order to generate deal-flow and deal identification.
Traditionally, this has meant above market returns and is one of the reasons that Canadian pensions are generally well funded.
This highlights the difference:
https://blogs.cfainstitute.org/investor/2016/05/17/lessons-f...
[1] https://www.forbes.com/2007/03/27/nz-yellow-pages-markets-eq...
[2] https://www.stuff.co.nz/business/money/64397212/yellow-direc...
One of Celsius’ shareholders and creditors is the stablecoin Tether. This broke its peg when Luna crashed, saw billions in outflows and never regained the peg. Been around 0.9990 for a month give or take when it used to hover a bit above 1.00
Luna crash hit a bunch of balance sheets, now Celsius has to recognize losses and fold. Question is who is next to fold? Probably Nexo, a Celsius clone. And Tether itself will be under immense strain.
Luna sparked a run for the exits, hence they could no longer meet withdrawals from new money.
However, it may well have dropped even further depending on the exchange. These aggregators aren't a reliable source generally speaking.
Here, have some Evergrande debt in exchange for your USDT.
They may have had one longer period, when they lost their bank account access….other than that this is the record. It is novel
The 0.1% is entirely theoretical. There has never been a documented Tether redemption so we have no idea what the actual terms are. We already know in many cases Tethers are created with no dollars changing hands: Celsius admitted to giving Tether Bitcoin for USDT as a loan
So without actual proof of redemption it’s naive to merely believe the stated terms of known liars.
The exchange prices are the real prices, and they haven’t been this low this long. Accompanied by outflows that is significant.
Are you sure about that? There are several people on this site who have claimed their company has successfully redeemed Tether.
And I’ve seen some of these claims. Upon pressing they got their money via Bitfinex, not Tether redemption
Wouldn't it be more accurate to call these unstablecoins?
But right now people are hesitant to arb and so need a higher premium.
They can just issue more Tethers to cover any market turbulence so that the price stays stable. You need to understand that these drawdowns cause an inflection in demand that drives monetary energy into the asset class, ultimately causing more large corporations and institutions to enter the market and driving growth in the prices. This all raises bullish sentiment.
Totally unrelated, but I was broke and homeless and I trusted all my money to this guy Mike J from a comment in the YouTube video that taught me all of the above. I haven't heard from him in a while but that just means he's busy and I'm sure it's going swell.
Sigh, it's like you technology types still don't get it after all these years.
the *clap* future *clap* of *clap* money
> Celsius does not make any representation as to the likely treatment of Digital Assets in your Celsius Account, including those in a Custody Wallet, in the event that you, Celsius or any Third Party Custodian becomes subject to an insolvency proceeding whether in the U.S. or in any other jurisdiction. You explicitly understand and acknowledge that the treatment of Digital Assets in the event of such an insolvency proceeding is unsettled, not guaranteed, and may result in a number of outcomes that are impossible to predict reliably, including but not limited to you being treated as an unsecured creditor and/or the total loss of any and all Digital Assets reflected in your Celsius Account, including those in a Custody Wallet.
I don't understand why anyone would put money in.
Fed folks changed their stance from “soft” landing to “softish”, meaning they are falling short of calling for recession.
Next 18 months are going to get very bumpy.
The time to prepare for this was in November - December 2021. [0] When the market euphoria was going close to its peak of peaks. Look at the responses then in [0]: 'Stock market up 1% today' on a daily chart. When I said it already started months ago [1], some point to data about the Fed 'official' announcements of being in (and defining) a recession and even still boldly suggesting afterwards: 'We are most certainly not in a recession.'
This is how the 99% think.
The problem is as with many of the commenters at the time still failed to understand is, you never, never, NEVER wait for the news to come out to prepare then or look at 'daily charts'.
You must prepare and expect for anything unexpected in the long term in advance, such as months or a year for events just like this. Uncertainty is frowned upon, especially when it is prolonged.
You only know it was a peak after it peaks. So your advice just boils down to 'sell before the price goes down'. What an insight!
And this was essentially announced years ago in advance of the interest rates now being raised.
Ah yes. You're reminding me about the warning I gave when stocks like $NET were going all the way up and I questioned others 'buying' / 'holding' it at the top and never selling, during the same period of euphoria at the time. [0] You can look at the responses yourself.
It is no different to those who I questioned why many bought Bitcoin at >$60K at the time, even when it reached back up again. [1]
Seems expected in advance to the entire market correcting. Great insight of mine not to join the 99% or wait months for a 'formal' announcement or data and then 'prepare' months afterwards.
Energy price shocks ripple across every part of the economy at high speeds, causing inflation in unexpected places.
Point is that there's an outside chance that aggressive interest rate hikes are deemed unnecessary when combatting inflation.
Though I agree with you; it's not straightforward. No one expected Putin to invade Ukraine, so there's that. But the signs of fed rate hike was clear IMO. If one wanted to be prepared and forego some of the profit they had about an year to prepare.
[1] https://www.aljazeera.com/economy/2021/6/16/federal-reserve-...
Hopefully the powers that be also know that, hence Biden's planned visit to Saudi Arabia [1], plus the NATO secretary general saying this weekend that "peace is possible" in Ukraine, certainly a different mindset than the one present among most of the Western leaders about two months ago (when going all in in order to get Putin down was presented as a plausible solution). We'll see what the future will bring.
[1] https://www.wsj.com/articles/white-house-set-to-announce-bid...
[2] https://www.youtube.com/watch?v=KUGY692OT6g (the quote I mentioned is made at the start of the video)
For reference, if you ever see a bank say this, it's probably a good idea to get to an ATM post-haste and withdrawal as much as you possible can.
If your crypto exchange goes away, you, of course, just lose everything.
But! The FDIC is not just insurance. It’s also a framework for risk management including liquidity risk. Banks have pretty detailed playbooks on how to manage liquidity risk that are routinely audited. It is therefore pretty rare for any US bank to have such issues and when they do it’s because they were cooking the books.
Reading through those I couldn’t actually find any banks that had evidence of liquidity issues. And the longest I saw for the fdic to get depositors access to their funds was the weekend.
Most of them don’t even tap FDIC insurance they just hand the depositors over to a different bank.
I pulled all my money from them (except $600 or so in dust) on Thanksgiving 2021. Thankful to (God? my minimally sufficient sense of self preservation finally kicking in?) for timing; and to their credit, it was a flawless withdrawal.
But yeah; inevitable things happen, just often takes longer than one would expect.
I’m not surprised, I hear this exact thought process from a lot of crypto maximalists.
It was LUNA in May
Celsius now
Probably USDD soon
A lot of these "fake internet money" coins have no use cases other than trading with the next sucker willing to buy on crypto platforms
And then you have platforms like Coinbase facilitating trading of such "assets" or tokens with little to no due diligence
A lot of these: Failed as a currency Failed as an inflation hedge Failed as a store of value
Crypto bros will try to do whatever mental gymnastics they can to justify their investment, probably because they are all in. But I can't wait for most of these coins to implode for good as they serve no use to society. Comparable to cigarettes (zero health benefits) than wine (harmful in large amounts, has health benefits in moderation).
If someone is offering you a yield of more than 18% APY, then you are the yield to the next guy!
BTC is still up an incredible amount over the last 5 years. More like created a new tech elite while shaking out the free-loaders every cycle.
Money, Influence over politics, Knowledge of dark corners.
I also wonder how much VCs are insider trading their own project’s coins and don’t care about the actual company because they made their profit on the rug pull.
Indeed. I don't know why at the time you had people buying something at >$60K (and I warned them not to [0]) or even so-called soothsaying influencers predicting at the time that it will reach >$100,000 in the same year. [1] or even predicting DOGE reaching $1 by September 2021. [2] Certainly it was to manipulate retail at buying the top and never selling.
So today, where are these 'experts' now? [1][2]
It seems the HODL narrative of Bitcoin as either a 'currency', 'hedge against inflation', and 'store of value' means it is a complete failure and is only useful for speculation. But not all 'coins' (not tokens) are exactly as useless like Bitcoin is.
I would expect the maximalists to keep screaming HODL everywhere to be trending to keep the cult relevant until the next cycle as many of them have bought in at very high prices (Because Musk, Saylor, etc told them to)
[0] https://news.ycombinator.com/item?id=27206314
I think you misunderstand what's happening. The 18.63% APY that they are currently offering is on a coin that went down 11.71% today. The rewards are locked for 1 year and are paid in CEL which is down 54.64% today.
The actual yield of the investment in USD is not going to be at a rate to reach 18.63% APY.
I don't quite follow your logic. Assuming withdraws weren't paused like they are now you would still be able to liquidate your position.
That’s the funniest thing I’ve read in a long time…
Paypal paid was burning hundreds of millions of dollars a month in giving away free money in order for it to gather market share.
However, AMM's are not new to crypto. The only thing new about crypto AMM's is that plebs like me can invest in them. Usually they are reserved for the wealthy elite, where back room deals and orderflows are handshakes instead of smart contracts.
However, it is still technically illegal for US plebs to access AMM's(Non-accreddited).
Consensus Capital Markets gives validators even more incentive to collude, Just like MEV. There has been numerous occasions where MEV has broken concensus. Theoretically these two concepts are the antithesis of what a blockchain is supposed to do.
These kind of 'Innovations' in harming the ecosystem tremendously. They are taking the centralized nature of normal orderbooks and trying to shove that into crypto.
Mirror was one of the reasons Terra failed and this concensus capital markets allowed the validators to absolutely make a killing during the collapse.
Not all of these projects will survive the cryptocurrency crash. We only saw many silly DeFi projects popping everywhere when the market goes up, but I'm very certain that many of them (not all of them) will shut down when the down side comes back.
In general, it looks like the cryptocurrency mania is finally dying again, as expected. [0] Now we will see how long Tether has left before causing more chaos to the cryptocurrency market.
It is worse than stocks as there is no productive value (actually it is the opposite, it costs a fortune to keep the networks running.)
Obvious solution is to encourage more regulatory framework around companies that claim to be custodial banks and investments. More audits, stable backings, and all of that.
That said: these weird DeFi platforms that were getting like 20% of whatever yields never made any sense to me.
20% isn't that great. You can get 15% on basic blackrock/vanguard funds.
I just never could understand why people would tolerate this sort of risk for that little reward.
Also, a lot of the rewards were paid out in Celsius’ own token (CEL) which is now almost worthless.
The risk/reward ratio was definitely not very good.
There’s a massive honking difference between a guaranteed 20% derived from lending fees versus potential market returns of 15%.
Their current illiquidity crisis is due to them having to loan/stake coins to generate yield. Celsius also doesn't have lockdown periods which makes risk management very tricky. Plus, they have zero-fee trading.
I can see Celsius becoming _the_ one-stop shop for novices once they release the card and on/off-ramp services.
This is not an ideal situation, but is perfectly acceptable when you consider where the yield comes from.