The wild, wild west of the crypto world is exposed once again

The Celcius news over the weekend has sent the price of bitcoin sharply lower. The low price reached $22,600. That was just above the 200 week moving average at $22,368.26.

Admittedly, I wasn't all that familiar with Celsius or what they do. However after watching a video on CNBC April 13, 2022, have a little more knowledge.

Click on this link to watch the CEO

It seems that Celsius gives crypto holders a very aggressive "Earned Reward" (which is really interest on their bitcoin loan) for pledging their crypto currencies with the firm. They in turn pool those crypto assets and lend them out to other institutions who need them. Those institutions in turn pays Celsius a rate which is above the rate that Celsius pays their clients for giving them their crypto assets.

The Celsius CEO says that they are doing what banks don't do. That is, give back most of what they earn from lending out the securities to the 3rd parties. How kind.

He says, as a result, they have a "delta neutral" business.

The question is, when they lend out the customers pledged crypto to whoever out there in the digital world, what happens to those crypto assets? Where do they go? How do they get them back when the client wants it back? If the institution who needs the bitcoin or whatever digital currency so much that they are willing to pay above market rates of say 7% or so, what are they doing with them? Are they just trading those positions hoping to make 15% on the volatility? Are they shuffling the spaghetti to someone else who needs them and pays 7.20%. Is it used in some sort of laundering operation where the 7% does not even matter?

No one knows.

However, it seems Celcius has a bunch of clients who are asking for their bitcoin back and who want the 7% on their loan as well. Celcius can't deliver because I assume they can't get the bitcoin back from the institution/retail client that they lent them to.

The house of cards is teetering.

That is how I read it.

So where are the regulators?

According to the CEO, the regulators call every day and ask them questions about things like "know your client", oligarch money, and money laundering, etc and they say "Yes we are all good. We are a good actor.".

The fact is, there is no regulation Regulation Regulation is a key attribute of any forex broker in the retail industry. When investing money with a brokerage it is important to first see if they are regulated as this affords several client protections and safeguards.The financial services industry is tightly regulated to help prevent illicit behavior and manipulation. This is not unlike any other industries with a high net worth, that rely on transparency.Each asset class has its own set of protocols put in place to combat their respective Regulation is a key attribute of any forex broker in the retail industry. When investing money with a brokerage it is important to first see if they are regulated as this affords several client protections and safeguards.The financial services industry is tightly regulated to help prevent illicit behavior and manipulation. This is not unlike any other industries with a high net worth, that rely on transparency.Each asset class has its own set of protocols put in place to combat their respective Read this Term and although they may say they are a good actor, are they really?

What caught my attention from what the CEO said went something like this.

• There are 25% of the people in the US who now own crypto. If regulators try to regulate it excessively, they will not get reelected.

Wow...sounds like the gun lobby modus operandi. Pay off the legislators. Next they will grade the legislators and block vote if they are not crypto friendly.

This game is a high stakes poker game. Celcius went all in, taking bitcoin, paying a rate higher than market rates, lending that bitcoin out for a higher rate and booking the difference. There is no regulators that track that loan, monitoring the firms capital, management of anti money laundering practices or the line of loans that are subsequently made outside of the Celcius initial transaction. Celcius say they have collateral of 300% from retail (300%?), and undercollateralized vs the institutions who are probably the biggest and most clients.

Now the powers that be, may prop up the bitcoin Bitcoin Bitcoin is the largest and world’s first digital currency launched back in 2009 by the entity, Satoshi Nakamoto. Being a digital currency, a defining feature of Bitcoin is that it functions without a central bank or single administrator. Rather, Bitcoin instead can be sent by peer-to-peer (P2P) networking, which is itself absent of any intermediaries.Instead of being a physical currency, Bitcoins represent pieces of digital code that can be sent and received across a kind of distributed ledger n Bitcoin is the largest and world’s first digital currency launched back in 2009 by the entity, Satoshi Nakamoto. Being a digital currency, a defining feature of Bitcoin is that it functions without a central bank or single administrator. Rather, Bitcoin instead can be sent by peer-to-peer (P2P) networking, which is itself absent of any intermediaries.Instead of being a physical currency, Bitcoins represent pieces of digital code that can be sent and received across a kind of distributed ledger n Read this Term market to try and calm it down as it is truly in their best interest to keep the beast alive, but I certainly continue to smell a rat.

And the NFA thought the retail forex market was the wild, wild west.