Celsius crisis heats up after crypto lender freezes withdrawals

Sign up for the Daily Newsletter, sent exclusively to our Premium subscribers. We break down the big and messy topics of Asia’s tech and startup community. Get the newsletter in your inbox everyday with a Premium subscription.

Hello reader,

The great crypto crisis of 2022 continues. In May, the UST algorithmic stablecoin and the Terra ecosystem collapsed, spreading panic across the cryptoverse. This week, it’s Celsius’ turn: The New Jersey-based crypto lender suspended withdrawals after facing what appeared to be a bank run.

Are these crashes a coincidence or is there more than meets the eye? Today’s premium article delves deeper.

Today we look at:

• What’s really happening with the Celsius crisis
• India-based Mohalla Tech’s US$5 billion valuation
• Other newsy highlights such as AirAsia’s new e-wallet and the possibility of an international listing board in China

Premium summary

Things are getting uncomfortably warm for Celsius

Image credit: Timmy Loen

I’ll admit to being quite inexperienced about investing in general. For quite some time, the only bull and bear I knew were the ones being used as political imagery in Fallout: New Vegas.

To a relative newcomer like myself, the recent crypto fiasco appears to come not long after the concept of cryptocurrency started to really enter the mainstream consciousness. This doesn’t really inspire confidence, but I’ll refrain from making any uneducated statements.

Today’s premium article – written by a colleague far more versed in crypto than myself – dives deep into what’s causing Celsius’ recent troubles.

• Celsius isn’t just a unit of measurement: As one of the largest companies in the crypto lending space, Celsius had loaned out over US$8 billion to clients and held almost US$12 billion in assets under management as of May. It also claimed to have 1.7 million clients.

• Seeing maroon: If Celsius had an obvious red flag, it was the high returns that could reach up to 18.6% a year, depending on the coins and the duration of the stake. While Celsius’ business model might look like a bank’s, its aggressive investing strategy, which was needed to cover its high interest rate payouts, appears more similar to a hedge fund’s.

• More hot water: This debacle adds to a growing list of problems for Celsius. In 2021, four US states – New Jersey, Texas, Alabama, and Kentucky – sent the company cease-and-desist letters. On June 16, those four states and Washington announced they are initiating their investigations into Celsius.

Does a unicorn with a US$5 billion valuation have five horns?

Quick bytes