Celsius Appears insolvent, and it's taking the whole crypto market with it
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Also posted it here on HN but it did not get much traction. What really baffles me is that major VCs have put hundreds of millions into what pretty much every one who has watched one or two episodes of "American Greed", would immediately recognise as being a ponzi scheme.
I e-mailed the regulators, the VCs etc... They did nothing, and now it is too late.
I predict that they will all eventually collapse. It is a bit delayed with them because there is a locking period for most of them, this means that they will be in trouble in the coming days/weeks as they will have to honour massive withdrawals.
https://old.reddit.com/r/CryptoCurrency/comments/v29t59/cels...
But crypto discussions on Reddit are just ridiculous. You do get some good nugets like OP's but for the most part it's a group of cryto bros pushing their own exposure.
The mod of r/food is also a mod of SRD and started banning people for talking about the drama on SRD, so they moved the conversation to SRDD as that mod wasn't a mod there so they could talk freely about it.
You can't escape the pettiness or drama anywhere, no matter how small the group is there will be infighting and manipulation.
If one major exchange goes bust and people learn that they have no recourse to recover funds, expect to see people pulling money out of other exchanges.
Well, they could have used Monero.
The paradox being that crypto is proving the benefits of heavy financial regulation by showing us a world without financial regulation (and I am talking as someone who has to deal with banking regulation and think the current massive amount of regulations is ridiculous and kills competition).
All those stories were solved across 120y of crisis and financials regulations. Not all of course, but finance, as a basis of the XXI century economy is far more robust that it was
I’m a big fan of the fact that when someone is pissed off at me they’re not allowed to just punch me in the face. I’m also a big fan of the fact that someone CAN metaphorically punch me in the face if I manage to piss off a whole slew of people, elected by and comprised of my compatriots, with various systems designed to mitigate emotionality and unfairness.
Duh this is a strictly good thing, when paired with democracy.
Regulation can exist and probably will exist, there are some proposals currently on the table. There is currently no regulation because regulators are laggards, not because it's contrary in spirit to cryptocurrencies.
Fraud is not an intrinsic characteristic to cryptocurrencies, it's an intrinsic characteristic to human nature. Regulation simply provides tools to fight fraud, either by making it more difficult to execute or by establishing discouraging penalties.
That the alternative monetary policy proposed by cryptocurrencies is better than the status-quo is still to be seen.
Welcome to the 19th century.
There's no new money entering this space anyway. Without customer deposits, they're toast as a business.
No wonder that it's hard for some people to see the Ponzi schemes, pyramid schemes and what else those things are called.
Regulations anyone?
Or do we now just see people loosing their money?
I'd argue it's hard to understand the higher-order effects of fractional reserve banking. The accounts are at least backed by a government and have over 100 years of lessons baked into them, so that's something.
The only regulations crypto needs is how to call things. Just like whatever Tesla has should not be called Autopilot, crypto prophets should not be allowed to call it investment. Call it gambling and off you go.
On the other hand, it's quite easy. After the third flavor of ETH and nested contracts, I thought to myself "fuck, that's complicated." Then just follow Buffett's advice of not investing in things you don't understand.
Everyone (or almost everyone) pushing cryptocurrency is, in one way or another, a speculator, so their incentives are not aligned at all with people who might actually want to use it as a currency.
Just the security practices required to avoid fraud are absurd, but since scammers can irreversibly empty your wallet, they're required. There's no credit card company to call, no fraud detection, no withdrawal limits, no way to lock your stolen card.
The same applies to personal information. Lose your key, lose your money. It requires the sort of data security and redundancy discipline that few people outside of tech are capable of.
"$stETH is a product by @LidoFinance.
It stands for (liquid) staked $ETH and it's one of the most innovative DeFi products to be released in the last few years.
$stETH can also be used to earn MORE yield than otherwise possible with vanilla $ETH.
Why?
Because while $stETH already earns staking yield, it can also be lent out or liquidity provisioned."
or more precisely
using collateral that's already beind used for collateral for something else.
see also rehypothecation
Now, you take that new token, exchange into new ETH, stake that new ETH, and get again that new token, ad infinitum, every time increasing your staked ETH amount and thus accruing stake yield of that multiplied staked ETH ... One would naturally expect that a system allowing for such things to happen simply must undergo "Rapid Unplanned Disassembly" at some point.
You can only exchange it back into ETH after the lock period is over. Sure, you can buy ETH from someone else in exchange for this token, but you will pay a premium for that: obviously, people prefer ETH to some token that can be exchanged for ETH in the future and there is not an infinite supply of ETH available to be sold for this token.
So no, you can’t just increase your ETH ad infinitum. At each iteration of the loop, your amount of tokens will decrease until you have none left.
(How close depends on how much sETH trades to ETH on the dollar - if I understand the article correctly, it used to be pretty close.)
Of course, that sounds stupid as hell and you'd certainly hope that someone thought of something better, but this is exactly what happened with Terra/LUNA, except with more financial engineering to obfuscate the "if it goes down 25% we're fucked".
What's a 3x?
In the context of "using leverage to provide better than expected returns in a Bull market", someone can buy TQQQ, securitize/create derivative (this is exclusively what crypto does) that returns 1.5 times the NASDAQ, sell you that derivative, and if the NASDAQ goes up 5% (TQQQ 15%) you get 7.5% and they get 7.5% (and your money).
If it goes down, you lose everything and they keep the money you gave them.
Step 2: give away money
Step 3: somehow start making money
Like most companies you'll see on HN, they are currently on step 2.
The discerning reader may note that this sounds like a terrible use for $860 million - and if that's the case, how much of the other $642 billion last year was properly allocated?
The loans were overcollateralised with the users Bitcoin.
The problem is Celsius wasn’t content with just earning interest from loaning money so they invested their users Bitcoin in crypto projects that ended up going pear shaped.
Surely there are going to be criminal charges forthcoming. Doing everything they can to prevent people withdrawing up to and including blatantly lying.
If history is any guide this isn’t close to over yet.
Fraud is still possible, of course, but consumers have WAY more protections with fiat investments.
Something that definitely can't be said of some of those fantasy funny coins.
Anyways, there is some kind of floor to which they can fall, and which will catch them.
What kind of "floor" is there for crypto? By definition it is not tied to anything non digital? Right?
Not a finance expert, but I disagree with what you're saying:
There's a feedback loop between:
1. The price of BTC, which depends on people's willingness to mine it (without which, BTC doesn't have security).
2. The willingness to mine BTC, which depends on the price. Why would you mine BTC if you're not sure whether you'll be able to sell it for more than you mined it for?
A decline in 1 can trigger a decline in 2, which can trigger a decline in 1, which can trigger a decline in 2.
BTC can have an end. Oh, and BTC is not like BitTorrent.
The "feedback loop" you describe would reach equilibrium due to difficulty adjustment (blocks could be really slow for some time). Granted it would then become cheaper to 51% attack. Maybe one could consider Bitcoin "dead" at that point but it would still be working.
If it crashes 90% and then goes back to 30% of its peak a couple years later, pundits will declare bitcoin collapsed, but the people that bought around the bottom will make out like bandits.
I dont see many failure modes for crypto itself. The exchanges and all the speculative bullshit built around it are a big problem, but the network itself will survive and there is a price where people will start betting on upside again.
I say this as someone that bought my first bitcoin at $5 and sold my last one for $4500. I left a lot on the table.
It's called gambling and you should consider yourself lucky. Very, very lucky. You basically whine about 90000% ROI when it could've been 900000%. Let that sink in for a moment.
Consider this: many small-scale investors entered the market right at, or very near recent peaks. What would someone say who bought in a year ago for like $50k, not $5? They'd be down over 50% at the moment and there's simply no guarantee the market will recover to the $60k+ levels seen in October and November last year.
Add on top of that people who invested by means of putting their life savings (again, not as uncommon as you might think) into shady operations like Celsius due to their dubious claims of %10 annual returns. They're completely screwed if things go sideways and Celsius closes its doors.
Same thing I'd say to someone that bought Netflix stock around the same time. Gamblers beware.
There's no similar mechanism with crypto. There's no annual dividend that is now on sale.
More likely to simply go to $0 as everyone heads to the exits.
The biggest, baddest parties will always draw the popular crowd, and the same DJs will know better when to quietly slip out the back door with bags full.
How does a well-regulated party compete against that without calling for more regulation?
In the end though they will probably still call for more regulation because once they have stood the test of time they will want to cement their position.