What to Do about Celsius
It’s been a rough 48 hours or so for crypto. Bitcoin (BTC) is down nearly 12% to $23,300 and Ether (ETH) has fallen more than 15% to $1,230.
They’ll improve in time – and I’ll get to that in a second.
First, the elephant in the room…
Today, it’s all about Celsius Network – the popular blockchain-based financial services “boutique” which, you’d better believe it, floats its own token.
It’s history; Celsius and its token have all but completely collapsed over the past 24 hours.
Hopefully this is all academic for you because I warned my subscribers and all of Twitter to get the hell out of Celsius back on June 3. In fact, I’ve been screaming from the mountaintops, ringing alarm bells since December 2021, when the company took forever to acknowledge it booked losses in a $120 million hack.
The company and its leadership always gave me a bad vibe, and when I dug deeper… yikes. I wasn’t shy about letting people know, either.
Still, warning about a collapse and an actual collapse are two different things, so let’s get into it…
Another Crypto Scam Detonates
After a nearly relentless few days in which a broad swath of stocks and cryptos took a pounding, Celsius announced it’s “pausing withdrawals” because of “extreme market conditions.”
With that said, a look at the public chain reveals Celsius sent around $320 million in different coins to FTX before it announced the “pause” on withdrawals. That’s a huge red flag.
Twitter is full of people pulling their hair out because they’re facing margin calls… but they can’t meet them because transfers are “paused.” Those people are screwed and may even get their collateral liquidated even if they can meet requirements.
But, like I said, I saw this coming.
Leadership, starting with the founder Alex Mashinsky, has a pattern of sketchy behavior – something I’ve called them out on repeatedly to their virtual faces on Clubhouse.
When Celsius was on the rise and everything was peachy-keen, they were assembling a cult of yes-men and blind followers. It was clear to me that they might be good engineers… but they were completely clueless about finance as a discipline, finance as a game.
Finance matters. Math matters.
But no one wanted to listen to me at the time; everyone was pocketing too much money. “I’m rich, so everyone should recognize me for the big genius I am,” was Mashinsky’s attitude.
But a lack of financial savvy was just the first red flag. Celsius was lending money to very questionable customers – small hedge funds, wildcat speculators, people borrowing money to short Bitcoin and the like, with pretty much zero regard for creditworthiness or long-term viability.
Celsius was a big player in the TerraLuna debacle, collecting 20% from them and paying their own customers 10%, pocketing the “spread.” Nevermind the fact that junk bonds, some of the worlds’ riskiest assets, pay 6% or 7%. At the end of the day, you can’t support a big Ponzi scheme with the proceeds from another, bigger Ponzi scheme.
Hey – math matters.
Then there were the “ghost wallets” – Celsius was making payments, in Ether to thousands of wallets. Everyone could see that the transactions were happening, but no one knew who was benefitting. It’s hard to be 100% certain, but it’s just as likely as not Celsius insiders were using those payments to filter ETH out of the system.
There were unsavory people involved, too – Yaron Shalem, was Chief Financial Officer at Celsius… until Israeli cops busted him for alleged cryptocurrency fraud in connection to an even bigger crypto-fraud case. Alex Mashinsky claimed not to really “know” who his own CFO was! Jamie Dimon knows every single exec at JPMorgan Chase – hell, he probably knows the guy who fixes the Xerox machine. There’s just no excuse.
Back when everything was peachy-keen, this was unsettling enough, but I could see it was rapidly coming to a head. Now it’s detonated.
Here’s What to Expect and What to Do
So, back on June 3, I began telling people to move their assets off the Celsius network altogether. Hopefully you listened, and finished up before yesterday. Otherwise, there’s a chance you’ll be able to get your money – if management’s not blowing smoke about orderly withdrawals like they’ve blown smoke about just about everything else. In other words, I wouldn’t bank on it.
“Orderly withdrawals” is probably going to be the best case scenario.
What’s more likely is you’ll take a haircut – and it won’t be pretty. Nexo, which is in much, much better shape than Celsius ever was, has offered to buy Celsius’ assets – they’re probably operating in good faith, and the offer is open until June 20, – one week from today.
If that happens, it’ll be the second-best case scenario, and investors can probably look forward to pennies on the dollar, which is better than… zero dollars.
Ultimately, this is a good thing for cryptocurrency as a whole. I mean, do you want to invest alongside a bunch of scammers and idiots?
Me neither. Soon enough these people will be A) massively discredited, B) on the run, or C) in jail, or D) all of the above. The landscape left after all this shakes out will be much friendlier to innovation, much stronger on transparency, and will have much, much more upside.
Right now the thing to do is buy quality coins on the dips – I’ll have more about that tomorrow. Where value is oversold, there buy it.
This is an excellent opportunity to invest or think about investing in protocol layers and the infrastructure of crypto. I’ll be going out to my subscribers with my specific recommendations shortly.
June 13, 2022,,,
Ouch and double ouch for me, many others and Celcius..
This is exactly why to do your OWN research: DYOR
Nick, insightful, I guess there’s much more going on Celsius, still haemorrhaging from Luna, and hope that CEL hodlers get something out. Another one bytes the dust, and regulators are now readying for the charge.
At this point, Nick Black might be the only truly honest guy in Crypto! I wish he could sit on my BOD.
Great update and being realistic. Thanks
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