10 questions to help you understand the Celsius affair (and its consequences) 😬
The collapse of the crypto markets is revealing the highly risky strategies employed by some platforms.
👉 The news. US giant Celsius has suspended operations and is preventing clients from accessing their funds.
👉 The background. The collapse of the LUNA/UST ecosystem and the fall in prices are threatening the solvency of many investment companies.
👉 Why it matters. These events are lifting the veil on the very risky strategies of some of them.
Celsius, what's that?
Celsius is an American start-up that allows you to lend or borrow cryptocurrencies in exchange for interest paid each week. Its operation is similar to that of a bank, with the difference that the company founded in 2017 by Alex Mashinsky is not regulated and has no solvency constraints or supervision over the management of funds.
"Celsius positions itself as a network or lender, but its market operations actually look a lot like those of a highly leveraged hedge fund," describes analytics firm CoinMetrics. "User deposits are actively managed and deployed on decentralised finance (DeFi) platforms to ensure its products achieve double-digit returns," it continued in a note published on Tuesday.
Celsius had 1.7 million customers worldwide and $12 billion in funds under management at the beginning of May.
What's happening to it?