But the crypto lender cannot lay on free lunches indefinitely or immunise against depositor runs. Price volatility scared Celsius customers into asking for their assets back. The platform apparently did not have funds readily available. Its own coin, CEL, had lost half its value in recent days.
As in any financial debacles, bosses expressed confidence until their moment of capitulation.
The problems at Celsius are a variation on a theme established by bombed-out stablecoin Terra. Its creators had pledged that its value, like a money-market fund, would stay in line with $1 per coin. But the overall concept of stability only holds good as underlying asset values rise. Crypto is being predictably hammered by the broad re-pricing of risk assets in the wake of accelerating inflation, higher interest rates and a possible recession.
Bank failures and their fallout eventually led to stringent capital requirements, deposit insurance and regulatory stress testing. Regulators have been slow to take on crypto amid uncertainty whether banking or securities law applies. While authorities figure that out, the victims of splashy website banners will grow steadily in number.
- Lex is a premium daily commentary service from the Financial Times.
