Hey folks, speaking as one of the casualties of Celsius’ bankruptcy filings back in , there’s been a number of interesting developments recently that I thought it important to highlight, and some glimmers of hope that I thought it important to weigh in on. First, let’s go over some recent events involving Celsius that have occurred over the last couple of weeks.
Celsius “Resembled” a Ponzi
Coindesk came out with a pretty damning article on September 7th pointing out how that Celsius was possibly inflating artificially the health and price of their native $CEL token, in addition to fundamentally not being able to generate revenue to pay off their advertised yields, therefore using new users’ deposited funds to pay off already existing user’s yields.
I know the words ponzi and ponzinomics are thrown around easily in the crypto-sphere, but I don’t agree with the fact that all failed projects are ponzis. For instance the Terra Luna collapse , I believe was because of fundamental flaws in a algorithmically-backed stable coin, or in other words, a broken system — not because of a ponzi-scheme. However in the case of Celsius, if these accusations are true, they fit the definition of a ponzi to the tee.
Leaked All Hands on Deck Call
Even more recently there was a leaked audio call of an internal-only meeting that occurred on September 8th. As to what CEO Alex Mashinky’s attitude towards where Celsius stands now, could be summed up in one quote:
“Pepsi filed for bankruptcy twice, right? Does it make the Pepsi taste less good? “Delta filed for bankruptcy, right? Do you not fly Delta because they filed for bankruptcy?”
In other words, it appears that Mashinsky is treating this as part of an organic process to build back Celsius bigger and better — a plan to be dubbed as plan “Kelvin” or “Celsius 2.0.” An issue that several employees questioned during the meeting was how daunting of a task this was based on the fact that many users have lost a great amount of trust in Celsius, or more specifically in Alex Mashinsky itself. Mashinsky’s response was pretty much a “if you build it they will come” kind of attitude, referencing how if they build a good enough product, Celsius can be trusted again.
The “Kelvin” plan centers around the idea of building a custody service — one that sounded similar to something like Coinbase Custody. This is a big contrast to what was reported by Celsius before, which was to build up their BTC mining division, Celsius Mining LLC.
Celsius Mining, LLC
If you read my previous article about the Celsius debacle, you’ll remember that there was some speculation about Celsius utilizing it’s mining subsidiary in order to help bail themselves out. Essentially by using $BTC miners, they were hoping for it to be profitable enough to produce “10,100 bitcoins in 2022, and was now mining 14.2 bitcoins per day.”
This idea has definitely gained traction with many depositors, and is being discussed as a viable option for a repayment plan for people’s losses:
A breakdown of this plan include the following:
- Assuming that Celsius has a 30% hole in its balance sheet, people would be able to receive a time-locked corresponding amount, more specifically the remaining 70% of their cryptocurrencies that they held on Celsius. The time-lock is in place in order to prevent another bank run.
- The remaining 30% of their deposits would be converted into equity or part ownership of Celsius Mining, LLC, where all of the depositors combined would eventually equate into at least 51% of ownership (or in other words majority ownership) of the mining company.
How profitable are $BTC mining companies?
Full disclosure, I’ve been a stockholder of $RIOT, one of the largest North American bitcoin mining companies for over a year, buying in idiotically close to ATH’s of around $50 dollars a share (like I said, I’m definitely not a trader) and currently it’s worth less than $8 dollars a share:
I don’t think this graph is indicative of how profiting mining companies may or may not be, because obviously prices are heavily tied into the health of the cryptocurrency market. My assumption with Riot and other mining companies is that once the cryptocurrency market goes risk-on-full-bull-mode that the prices for mining companies will result in huge increases as well.
Alternatively it’s important to consider how profitable mining can be in general if $BTC is in the middle of a bear market. There’s a death-spiral effect to be cognizant of as many mining companies have had to sell off $BTC in order to stay running, which can start a cycle of even more $BTC as sell pressure can cause even further price dumping.
Conclusion
All this being said, it seems like the only viable options right now are either company liquidation (where Celsius would dissolve and give back to customers whatever they’re able to sell off), Celsius Mining, or as discussed in their leaked call, turn Celsius into a custody program. Although it won’t be probably for at least another few years (or at the very least until the next bull-run) when mining companies can see fantastic runs again, in my opinion as a long-term investor and hodler, I would prefer this much better than potentially not getting anything at all, or trusting Mashinsky again with a custody service.
If Celsius is going forward with paying back it’s depositors with shares in equity, then I would hope that they would do so responsibly. I personally would prefer Mashinsky to no longer be involved at all, simply because I don’t trust him to be responsible with my funds. If you’ve been tracking the news about , another mining company, like Celsius they had to freeze withdrawals due to insolvency issues and it has been suspected that they too, like Celsius may have using users’ funds as capital for further gains.
Do you have different suggestions that can be made for a hopeful path forward? If so (or if you have more questions or concerns about the direction Celsius chooses going forward) I strongly recommend that you let the folks with the Official Committee of Unsecured Creditors (https://twitter.com/CelsiusUcc) know, or at the very least I would read through their tweets as there are many of ideas being floated around.
And as always, thanks again for reading, and if you haven’t already, please be sure to start following me here and on twitter to get all my latest updates: https://twitter.com/CryptosWith
Disclaimer: None of the content within this article is meant to be financial advice. Please do your own research and/or contact a financial advisor to find what investments might be best for you.
