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Celsius’ Fall Is a Turning Point for DeFi

Celsius’ Fall Is a Turning Point for DeFi

A note from Ian: Yes, the crypto market has taken a beating the last few weeks. But this correction is creating a rare, once-in-a-lifetime opportunity. That’s why we’ve been frantically working behind the scenes to put together an emergency crypto event next week. My research indicates that this correction is setting the crypto market up for a massive bull run. And I’ve uncovered seven cryptos with the potential to hand you seven-figure profits. On Tuesday, June 28, at 1 p.m. Eastern time, I’ll tell you all about them. All you have to do is click here to claim your spot.

 

I’ll never forget the day Lehman Brothers went bankrupt.

It was September 15, 2008. CNBC was filming outside Lehman’s headquarters.

I watched as hundreds of employees left their offices with boxes and briefcases.

Just a few days prior, Lehman was one of the biggest banks on Wall Street. It had a storied history and $600 billion in assets.

And in an instant, the 160-year-old bank was gone.

The bank’s collapse sparked a contagion on Wall Street.

Other banks on the Street were forced to write off billions in losses.

Many critics put the blame on credit derivatives. They were a new financial innovation that helped mitigate credit risk.

But it wasn’t their fault — banks still use them today.

Lehman had just made terrible bets.

It overleveraged into credit derivatives backed by subprime mortgages.

When the housing market cooled, those bets turned sour.

And when investors got a whiff of Lehman’s potential losses, they lost confidence and refused to extend more credit.

There’s a similar situation playing out in the crypto markets right now.

A few crypto lenders, like Celsius, overleveraged themselves into decentralized finance (DeFi).

They might be on the verge of insolvency.

But this is a natural part of the creative destruction of capitalism.

And it will make DeFi stronger as a result.

DeFi Cuts Out the Role of the Bank

DeFi is poised to turn the banking world upside down.

Powered by smart contracts, DeFi allows anyone to borrow and lend digital assets without the need for a middleman.

It also allows for the trading of digital assets without the need for a centralized exchange or market maker.

This cuts out the role of the bank from traditional financial services.

This underlying technology has spurred a new industry.

Crypto lenders like Celsius, Nexo and BlockFi offer an easy way for anyone to deposit their tokens and earn yields.

The lenders take customer’s cryptos and lend them across the DeFi ecosystem, looking for the best yields.

Except they don’t always make sound decisions with customers’ money…

Celsius’ Bad Bet Triggered a Digital Bank Run

Lehman overleveraged into credit derivatives and subprime mortgages.

In a similar way, it appears that crypto lender Celsius took user deposits, borrowed against these assets and then reinvested these borrowed assets to achieve higher yields.

The practice worked fine as crypto prices went up.

However, as the market fell in the spring, the value of the lender’s outstanding debt was more than it was able to pay back.

Celsius also lost millions, perhaps billions, on a bad bet on LUNA.

If that wasn’t bad enough, management wasn’t transparent about those losses.

Like with Lehman, as soon as customers heard Celsius might be having financial issues, they rushed to pull their digital assets.

This triggered a digital bank run, as Celsius was forced to liquidate assets to pay back customers.

The company halted withdrawals over a week ago.

It also led to a sharp fall in the crypto markets as overleveraged lenders were forced to sell assets to meet margin calls.

And just this morning, the CEO of crypto lender BlockFi announced a $250 million line of credit from crypto exchange FTX.

This is a sign that there’s a price where smaller, leveraged lenders will find buyers.

It’s just like how larger banks such as JPMorgan Chase and Citibank bought up smaller banks during the financial crisis.

In hindsight, the Lehman crash was an amazing buying opportunity for banks.

I expect this time will be no different for crypto.

Don’t Miss My Upcoming Webinar

Right now, the crypto market is down nearly 70% from its all-time high in November.

But even with the recent crash, I believe the crypto sector is set for its biggest bull run ever.

And during an exclusive webinar on June 28, I’ll reveal the catalyst that’s about to ignite a massive rally.

In fact, thanks to this catalyst, I expect cryptos to become a $200 trillion asset class.

And keep in mind that today, the entire crypto market is worth less than $1 trillion.

So I’m talking about explosive growth in the months ahead.

You definitely don’t want to miss this webinar.

To RSVP today, simply click the link here and enter your email address.

Regards,

Ian King cryptocurrency bitcoin expert at banyan hill publishing signature

Ian King

Editor, Strategic Fortunes

Morning Movers


 

From open till noon Eastern time.

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