Used to being prolix on social networks and in the media, Alex Mashinsky, the boss of Celsius Network, has not communicated since June 15, 2022, two days after his platform announced the freezing of “all withdrawals, exchanges, and transfers”.

It is however in this period that investors in the cryptocurrency world would be more than ever eager to hear him speak to reassure the community. His last message on Twitter was simply to say that his teams were working non-stop in a difficult period:

His book, which he announced as a future best-seller, called “The Mashinsky Method: The Decentralized Path to Financial”, would be a good opportunity for him to promote himself.

Of course, in a Bear Market that has him blocking withdrawals from Celsius Network users, it's harder to talk about his decentralized method to financial freedom.

As always, you have to be wary of those people who preach big, enticing principles and then do something else entirely. I recently suggested on Twitter that his book be renamed: “The Alex Mashinsky Method: I own your Keys on CelsiusNetwork, I own your Bitcoin”.

Joking aside, the situation is more alarming than ever for Celsius Network, which is facing bankruptcy. Since June 13, 2022, Celsius clients are still waiting to withdraw their funds, and Celsius' silence is fueling fears about its future. Goldman Sachs has reportedly already raised $2 billion to buy the platform's assets under management in the event of bankruptcy, according to CoinDesk.

Celsius is positioning itself as one of the major players to access decentralized finance services (DeFi). In particular, it offers to conduct cryptocurrency lending transactions. Lenders deposit amounts in cryptos, which are borrowed by others against a promise of a return of up to 18% per year. This return is assured in principle by the platform's investments in decentralized finance protocols, such as Anchor's, based on the Terra Blockchain.

At the beginning of May 2022, the platform had $11.8 billion in assets under management and claimed over 1.7 million depositors. But it was hit hard by the collapse of Terra, and its stablecoin UST - one of the most prevalent in the portfolios of individuals and crypto asset managers alike.

This failure of the Terra Luna ecosystem has accelerated the fall of the entire market.

Since May 5, 2022, over $1,000 billion in crypto capitalization has been wiped out. These violent fluctuations have caused the value of the loans to fall sharply. As well as that of the assets deposited as collateral for these loans, often cryptocurrencies. The fear is that the value of cryptos will fall further and reach the point of no return.

If Bitcoin or Ether reach levels too low to guarantee the liquidity of the Celsius platform, the risk of default will be imminent. At the risk of seeing investor deposits go down the drain.

According to the Wall Street Journal, Celsius holds $19 billion in assets, while it has only $1 billion in capital. As a result, it has an asset-to-capital ratio of 19 to 1. By comparison, the average asset-to-capital ratio for North American banks is 9 to 1.

In the wake of Celsius Network, other platforms such as BabelFinance and CoinFlex have announced a freeze on their withdrawals. The level of interconnection between the platforms raises fears of a domino effect, which could once again plunge the market into the unknown. Another DeFi heavyweight, BlockFi, is also in serious trouble. The American giant FTX is said to be in line to buy it for 25 million dollars.

Rather a good deal, given that BlockFi was valued at nearly $5B in mid-2021:

No doubt the sign of a beginning of consolidation in the crypto sector, at a time when pressure from regulators is intensifying. This Bear Market will allow us to make the selection by purging the market of companies that have seen too much and have not known how to prepare for the bad days that can arrive faster than imagined in this world where everything goes very fast.

Final Thoughts

Again, all of these unfortunate stories bring us back to two essential realities. The first is that you absolutely must have the private keys to your Bitcoin and Altcoins if you choose to buy them. The second is that you should not give in to greed by giving away the private keys to your cryptocurrencies to get impossible returns that should immediately alert you to the possibility of scams.

All these Ponzi schemes always end badly. Unfortunately, it will be the users who will suffer the biggest consequences, while the founder of Celsius can continue to advocate decentralization to sell books while freezing the assets of his customers.

Don't trust, verify. This will make you more suspicious and prevent you from falling into the trap of easy money that always ends badly.

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