Crypto Giant Celsius Overheats into bankruptcy. Investor money left frozen[Finance Fridays]

Turns out Top-Tier Wordplay and Finance Fridays go well together

Devansh

Aug 05, 2022

To learn more about the newsletter, check our detailed About Page + FAQs

To help me understand you better, please fill out this anonymous, 2-min survey

What do Celsius the Crypto company and Celsius the unit of measurement have in common,

Both of them crashed and burned in America.

Yes, I came up with that on my own.

To those of you know that don’t know, Celcius is a crypto platform. It allowed users access to different cryptocurrencies. Users could engage in the following activities-

For a group of people that claim to hate big banks, their solutions do really end up looking a lot like banks. Without the protection. Source

Celsius was among the biggest names in the game. At its peak, its token was worth 7.8 USD. Celsius has 1.7 million users and a whole bunch of money flowing in from people who were ready to be safe from the evil financial system.

In October 2021, CEO Alex Mashinsky said the crypto lender had $25 billion in assets under management. Even as recently as May — despite crashing cryptocurrency prices — the lender was managing about $11.8 billion in assets, according to its website. The firm had another $8 billion in client loans, making it one of the world’s biggest names in crypto lending.
-Source, “From $25 billion to $167 million: How a major crypto lender collapsed and dragged many investors down with it”- CNBC

Well, things aren’t looking so hot for them right now. Celsius is declaring bankruptcy, which is bad enough for an organization that claimed to be “better than a bank”. However, they have completely frozen investor money, meaning that people who invested money are unable to access their funds. If Celsius goes down, these people will lose all their money. And as with every other crash, it is the retail investors like you and me who will lose money. How much money? Celsius owes $4.7 billion to users. To understand the scummy tactics being employed by Celsius to pull this off, I’ll leave a video by the amazing Coffeezilla later on this post.

I can’t tell my wife and kids our retirement and dreams have been stolen from us.
-Retail investor who put money into Celsius. Source

As satisfying as this crash is, far be it from me to dance on the graves of people who see more red than the cleanup crew of the Tomatina festival. Even though these people did tell me that I didn’t understand crypto and was brainwashed by the system. In this post/email, I will be covering, the biggest learnings from this situation so that you can protect yourself and your loved ones from falling into such traps.

Important Learnings

Before you get into this, make sure you check out my Finance Fridays on the Crypto Crash. That covers why the Crypto market was had all this capital flowing. Once you understand the specifics of what caused the Crypto Bubble, you’ll understand the points I cover here better.

This story has the following learnings-

Learn the fables- Celsius lured customers with unsustainable deals to get their money into a fundamentally garbage product. It also employed a lot of hype using celebrities and ‘finance experts’ to drum up its name. Many of these original investors got out, leaving retail investors holding the bag. If this sounds familiar, this is exactly what I’d described when talking about why Companies with insane growth and valuations crash violently. One of the best ways to protect yourself from getting caught up in bubbles is to read the history of such events and spot the patterns. As they say, History repeats itself.
Don’t let this be you. Article
Companies are out to make money- Every company is out to make money. It’s literally written into their responsibilities. And I’m not saying that an organization can’t make money and help people at the same time. They absolutely can and do. When it came to Celsius, many people treated them (and some still do) as David, helping the everyday man be free from the evil clutches of Goliath. To the point, where they refused to think critically. Celsius took advantage of this and hung them out to dry. Even as they go bankrupt, Celsius wants to rehire former executive at $93,000 a month.
The Devil is in the Details: Many people signed up for Celsius based on the marketing and the way they presented their platform as a low-risk investment. However, the fine print presented a very different picture. The Coffezilla video has more deets. However, when making financial decisions, read the fine print. Otherwise, you’ll end up out in the cold.
Consider the Tradeoffs: Many people were very into the decentralization of crypto. And hey, no oversights and fees slowing you down. All amazing when things go up. However, when the market crashes you have no centralized figure to blame/ask for help. No FDIC to cover your losses. No oversight turns into no consumer protection to help you and stop you from falling for scams. Had Celsius offered a traditional product/service (like this newsletter), then they would have been in jail already. As bloated and corrupt as our financial system is, it exists for a reason. Before doing away with anything, try to learn about why it exists in the first place. Reading history will help with that. Otherwise, it will be your finances/resources that will end up …iced
Choose your masters wisely: Old school wisdom states that when your Taxi Driver gives you stock tips, sell immediately. This, however, doesn’t always hold true, since formal qualifications aren’t always the best proxy for expertise. For all you know, your Uber Driver might be a reader of this newsletter, making them better than 99% of the “experts” industry. With the internet, not listening to the right person means a lot of lost gains. Listening to the wrong person means losing money. So be very careful when picking your guru. How can you do that?
Build your foundations: So how can you judge the correct people to take advice from? You need baseline knowledge to filter out the good from the bad. But this presents another problem, You can’t possibly be a subject matter expert in every field. Here’s the neat thing, you don’t need to. The 80-20 Rule is your best friend. Proof- I was able to get a 100 USD/hour contract consulting with America’s biggest stock-picking firm, while having a mostly basic understanding of economics and finance. The key is to build your basic knowledge in the key areas. Then you stack your understanding of different domains to analyze situations/advice from different perspectives.
Kill your heroes- One of the biggest reasons that crypto was so hyped was that everyone from Kim Kardashian to ‘cool billionaires’ Elon Musk and Mark Cuban was promoting it. The big reason people pay so many celebrities for product endorsements is that creators and their audience start forming a para-social relationship. This makes you more likely to trust the creator on topics. This trust can be monetized when selling you products. No one is immune to it. However, you can protect yourself from its worst effects. Analyze all their messaging especially when it comes to matters pertaining to health, finances, and life decisions. One of the reasons I always link my sources is so that you can verify everything I say for yourself. Look into things, test them out, and come to your own conclusions.

I know such topics aren’t always the most pleasant to cover, but it is important to analyze them. They will ensure that you don’t end up in a nightmare chasing your dreams.

I created Technology Interviews Made Simple using new techniques discovered through tutoring multiple people into top tech firms. The newsletter is designed to help you succeed, saving you from hours wasted on the Leetcode grind. I have a 100% satisfaction policy, so you can try it out at no risk to you. You can read the FAQs and find out more here. Use the button below to get 50% off for upto a whole year.

Get 50% off for 1 year

This is a limited-time offer, that I’m running to celebrate my almost 50 questions completed. Take advantage of it by clicking the button above.

If you have enjoyed this post so far, please make sure you like it (the little heart button in the email/post). I also have a special request for you.

Special Request

This newsletter has received a lot of love. If you haven’t already, I would really appreciate it if you could take 5 seconds to let Substack know that they should feature this publication on their pages. This will allow more people to see the newsletter.

There is a simple form in Substack that you can fill up for it. Here it is. Thank you.

https://docs.google.com/forms/d/e/1FAIpQLScs-yyToUvWUXIUuIfxz17dmZfzpNp5g7Gw7JUgzbFEhSxsvw/viewform

To get your Substack URL, follow the following steps-

Open - https://substack.com/
If you haven’t already, log in with your email.
In the top right corner, you will see your icon. Click on it. You will see the drop-down. Click on your name/profile. That will show you the link.

Click on the circled place to get your URL

You will be redirected to your URL. Please put that in to the survey. Appreciate your help.

In the comments below, share what topic you want to focus on next. I’d be interested in learning and will cover them. To learn more about the newsletter, check our detailed About Page + FAQs

If you liked this post, make sure you fill out this survey. It’s anonymous and will take 2 minutes of your time. It will help me understand you better, allowing for better content.

https://forms.gle/XfTXSjnC8W2wR9qT9

I’ll see you living the dream.

Go kill all and Stay Woke,

Devansh <3

To make sure you get the most out of Finance Fridays, make sure you’re checking in the rest of the days as well. Leverage all the techniques I have discovered through my successful tutoring to easily succeed in your interviews and save your time and energy by joining the premium subscribers down below. Get a discount (for a whole year) using the button below

Get 20% off for 1 year