Bitcoin price: Crypto lender Celsius owes users $4.7 billion, bankruptcy filing reveals

Cryptocurrency lending platform Celsius Network owes its 1.7 million users billions of dollars, CEO and founder Alex Mashinsky has said.

Cryptocurrency lending platform Celsius Network owes its 1.7 million users billions of dollars, CEO and founder Alex Mashinsky has said.

According to a declaration for Chapter 11 bankruptcy earlier this week, filed by Mashinsky at the US Bankruptcy Court for the Southern District of New York, of the US$5.5 billion of Celsius’ total liabilities, more than $4.7 billion is owed to users.

The UK-based company pays interest on cryptocurrency deposits, loans them out and also sells its own token, CEL, but froze all activities in mid-June after a particularly rough week for cryptocurrency.

According to business publication Quartz, “Celsius operates like an unregulated bank, enticing customers with staggeringly high rates for deposits of cryptocurrencies, and then loaning out those deposits to other customers”.

The platform relied mostly on bitcoin to stake its fortune — and after the token plunged drastically last month, the crypto loan giant found itself unable to cough up money to pay back its debts, prompting it to take the unprecedented step of pausing all withdrawals on the platform three weeks ago.

The broader cryptocurrency market has shed $US2 trillion ($2.9 trillion) since its peak in November last year while bitcoin’s price has fallen 40 per cent in the past 12 months. The bitcoin price was AU$31,566 today.

In the 61-page court filing, Mashinsky attributed the financial troubles to market conditions, poorly thought out bets, and mismanagement of the lender’s rapid growth.

“The amount of digital assets on the platform grew father than the company was prepared to deploy,” he stated.

“As a result, the company made what, in hindsight, proved to be certain poor asset deployment decisions.”

In a blog post at the time, the company warned it was “pausing” all withdrawals and transfers between accounts, adding: “Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, swap, and transfers between accounts.

“We are taking this action today to put Celsius in a better position to honour, over time, its withdrawal obligations.”

But the platform’s terms of use have raised questions about whether users may be able to recover their cryptocurrency deposits or collateral — with Mashinsky saying the basis of the contract between Celsius and its users explicitly stated that the company has ownership rights over customer deposits, as well as the right to lend, sell, transfer or use them for any period of time.

He tweeted two days later that the Celsius Network was “working non-stop” to resolve the issues.

“We’re focused on your concerns and thankful to have heard from so many,” he said.

“To see you come together is a clear sign our community is the strongest in the world. This is a difficult moment; your patience and support mean the world to us.”

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Turmoil in cryptocurrency market hits Celsius as platform files for voluntary bankruptcy in United States

A month after Celsius froze withdrawals from its platform, the cryptocurrency investment platform Wednesday, announced that it has filed for bankruptcy in the United States. The firm has started voluntary Chapter 11 proceedings in order to give the company the chance to stabilise its operations. The company said in its statement that it was looking to restructure in a way that would maximise value for all stakeholders. It also said that it has $167 million in cash on hand to cover immediate requirements in the meanwhile. As per an AFP report, this is the latest sign of the ongoing turmoil in the cryptocurrency industry. Voyager Digital, a specialist in lending cryptocurrencies, also declared bankruptcy last week.

Watch | Crypto lender Celsius files for bankruptcy

Three Arrows Capital, a Singaporean investment company, is in liquidation. Due to a cash shortage, certain businesses, including CoinFlex and Babel Finance, have also stopped accepting withdrawals.

As per a statement by a special committee of the Celsius board of directors, without the withdrawal freeze, “the acceleration… would have allowed certain customers — those who were first to act — to be paid in full while leaving others behind to wait.”  

Also read | Electricity used to mine Bitcoin falls as crypto crisis widens

Co-founder and CEO of Celsius Alex Mashinsky remarked, “This is the right decision for our community and company.”

“I am confident that when we look back at the history of Celsius, we will see this as a defining moment, where acting with resolve and confidence served the community and strengthened the future of the company,” he added.

Also read | Bitcoin drops below $20,000 to lowest since December 2020

In the US, Chapter 11 enables an organisation that is unable to pay its debts to restructure away from its creditors while carrying on with its current business.

Bitcoin, one of the most well-known cryptocurrencies, has lost more than half of its value since the start of the year and is now worth just over $20,000. When it reached its peak in November 2021, it was valued at around $69,000.

(With inputs from agencies)


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US Fed vice chair calls for urgent regulation in cryptocurrency market


Vice Chair of the US Federal Reserve, Lael Brainard, called for urgent regulation Friday in the cryptocurrency market.

“The recent turbulence and losses among retail investors in crypto highlight the urgent need to ensure compliance with existing regulations and to fill any gaps where regulations or enforcement may need to be tailored—for instance, for decentralized protocols and platforms,” she said at the Bank of England Conference in London.

“As we consider how to address the potential future financial stability risks of the evolving crypto financial system, it is important to start with strong basic regulatory foundations,” she said.

Brainard stressed that innovation has made financial services faster, cheaper and reduced costs in finance but added that some costs are also necessary to keep the system safe.

She cited the price collapse of the controversial stablecoin TerraUSD, also known as UST, in June, which led to turmoil in the crypto market.

“The Terra crash reminds us how quickly an asset that purports to maintain a stable value relative to fiat currency can become subject to a run,” she said. “The collapse of Terra and the previous failures of several other unbacked algorithmic stablecoins are reminiscent of classic runs throughout history. New technology and financial engineering cannot by themselves convert risky assets into safe ones.”

Brainard emphasized that regulatory foundations for the crypto financial system should be established before the crypto ecosystem becomes large and poses risks to the stability of the broader financial system.

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Crypto winter: Why this bitcoin bear market is different from the past

For a generation of alienated techies, crypto’s all-for-one ethos was its biggest draw. Now panic is spreading across this universe — and that same ethos is posing what may be the biggest threat yet to its survival.

What started this year in crypto as a “risk-off” bout of selling fueled by a suddenly determined to rein in excesses has exposed a web of interconnectedness that looks a little like the tangle of derivatives that brought down the global financial system in 2008. As slipped almost 70% from its record high, a panoply of altcoins also plummeted. The collapse of the Terra ecosystem — a much-hyped experiment in decentralized finance — began with its algorithmic stablecoin losing its peg to the US dollar, and ended with a bank run that made $40 billion of tokens virtually worthless. Crypto collateral that seemed valuable enough to support loans one day became deeply discounted or illiquid, putting the fates of a previously invincible hedge fund and several high-profile lenders in doubt.

The seeds that spawned the meltdown — greed, overuse of leverage, a dogmatic belief in “number go up” — aren’t anything new. They’ve been present when virtually every other asset bubble popped. In crypto, though, and particularly at this exact moment, they are landing in a new and still largely unregulated industry all at once, with boundaries blurred and failsafes weakened by a conviction that everyone involved could get rich together.

Also Read: Bitcoin heading to zero, says China state media amid global crypto downturn


Crypto has gone through several major drops in its history — known by its cognoscenti as “crypto winters” and to the rest of finance as a bear market — but the market’s expansion and increasing adoption from Main Street to Wall Street means more is at stake now. Kim Kardashian hawking a that tanked shortly afterward is one thing, but Fidelity’s plans to offer in 401(k)s could impact an entire generation. Its growth has also made this year’s turbulence reverberate that much more: After crypto’s last two-year hibernation ended in 2020, the sector spiked to around $3 trillion in total assets last November, before plunging to less than $1 trillion.

“It’s got a different flavor this time,” Jason Urban, co-head of trading at Galaxy Digital Holdings Ltd., said in an interview. Galaxy, the $2 billion digital-asset brokerage founded by billionaire Mike Novogratz, benefited immensely from crypto’s rise — but was also one of the industry’s most prominent investors in the Terra experiment. “Truthfully, it’s being a victim of your own success.”

If Terra was this crypto winter’s Bear Stearns, many fear that the Lehman Brothers moment is just around the corner. Just as the inability of lenders to meet margin calls was an early warning sign in the 2008 financial crisis, crypto this month has had its equivalent: Celsius Network, Babel Finance and Three Arrows Capital all revealed major troubles as digital-asset prices plunged, triggering a liquidity crunch that ultimately stems from the industry’s interdependence.

“In 2022, the downturn looks far more like a traditional financial de-leveraging,” said Lex Sokolin, global fintech co-head at ConsenSys. “All the words that people use, like ‘a run on the bank’ or ‘insolvent,’ are the same that you would apply to a functioning but overheated traditional financial sector. Consumer confidence and perception of bad actors definitely played a role in both cases, but what is happening now is about money moving out of deployed, functional systems due to over-leverage and poor risk-taking.”

In bullish periods, leverage is a way for investors to make bigger profits with less cash, but when the market tanks, those positions quickly unwind. And because it’s crypto, such bets usually involve more than one kind of asset — making contagion across the market even more likely to occur.

Crypto loans — particularly those in decentralized-finance apps that dispense with intermediaries like banks — often require borrowers to put up more collateral than the loan is worth, given the risk of accepting such assets. But when market prices sour, loans that were once over-collateralized become suddenly at risk of liquidation — a process that often happens automatically in DeFi and has been exacerbated by the rise of traders and bots hunting for ways to make a quick buck.

John Griffin, a finance professor at University of Texas at Austin, said the rise of crypto prices last year was likely fueled by leveraged speculation, perhaps more so than in the previous crypto winter. An environment of rock-bottom rates and ultra-accommodative monetary policy helped set the stage.

“With rising as well as lack of trust in leveraged platforms, this de-leveraging cycle has the effect of unwinding these prices much more rapidly than they rose,” he said. Though traditional often rely on a slow and steady amount of leverage to grow, that effect is seemingly amplified in crypto because of how speculation concentrates in the sector.

Regulators are circling the sector, watching for signs of instability that might threaten their infant plans to rein in crypto. Even rules that were announced in spring have had to change in the wake of Terra’s collapse, with some jurisdictions preparing rules to ease the systemic impact of failed stablecoin systems. Any further crypto failures could ultimately pave the way for tougher rules, making a market rebound any time soon less likely.

“There may be some bear rallies, but I don’t see a catalyst to reverse the cycle anytime soon,” Griffin said. “When the Nasdaq bubble burst, our research found that the smart investors got out first and sold as prices went down, whereas individuals bought all the way down and continually lost money. I hope history doesn’t repeat itself, but it often does.”

Now back around $1 trillion, the crypto market is only marginally above the approximately $830 billion mark it reached in early 2018 before the last winter set in, spurring a downdraft that sent the market to as low as about $100 billion at its depths, according to CoinMarketCap data. Then, digital assets were the playground of dedicated retail investors and a select number of crypto-focused funds. This time around, the sector has built a broader appeal to both mom and pop investors and hedge fund titans alike, causing regulators to frequently intervene with statements warning consumers of the risk of trading such assets. As one infamous (now banned) advert on London’s transport network read in late 2020: “If you’re seeing on a bus, it’s time to buy.”

Unlike crypto’s early believers, mass adoption means most investors now view crypto as just another asset class and treat it in much the same way as the rest of their portfolio. That makes crypto prices more correlated to everything else, like technology stocks.

Unfortunately, that doesn’t make most crypto bets any less complex to understand. Though most of the financial world is taking a beating in 2022, the recent crypto market crash was amplified by its experimental and speculative nature, wiping out small-town traders who stuck their life savings in untested projects like Terra with little recourse. And the sector’s hype machine is blaring louder than ever, utilizing tools like Twitter and Reddit that have been strengthened by new generations of crypto acolytes. Exchanges have also done their part, with FTX, Binance and Crypto.com all spending on marketing and high-profile sponsorships.

Sina Meier, managing director at crypto fund manager 21Shares AG, said that extreme level of risk demonstrates exactly why crypto isn’t for everyone. “Some people should definitely stay away,” she said during a panel discussion earlier this month at Bloomberg’s Future of Finance conference in Zurich. Many retail investors “are lost, they just follow what they read in the newspapers. That’s a mistake.”

Before the previous crypto winter, many startups had used initial coin offerings, or ICOs, to raise capital by issuing their own tokens to investors. They suffered when coin prices came crashing down because they had kept most of their value in that same pool of assets, plus Ether, and it worsened when regulators started to crack down on ICOs as akin to offering unregistered securities to investors.

This time around, the funding landscape is vastly different. Many startups born out of the last freeze, such as nonfungible-token and gaming platform Dapper Labs, have sought out venture capital funding as a more traditional route to raising cash. Behemoths like Andreessen Horowitz and Sequoia Capital collectively plugged almost $43 billion into the sector since late 2020 when the last bull market began, according to data from PitchBook.

This means that instead of relying on crypto wealth, some of its biggest players actually have vast reserves of hard currency stored to get them through the blizzard as they work on growing new blockchains or building decentralized media platforms. On the other hand, the recent end to the bull market means they’ve been spending that cash much faster than it’s been coming in.


This month Coinbase Global Inc., Crypto.com, Gemini Trust and BlockFi Inc. are among the crypto companies to have announced swaths of layoffs, citing the general macroeconomic downturn for derailing their previously ever-expanding plans. Coinbase, which had hired about 1,200 people this year alone, is now laying off about as many employees in an 18% cut to its workforce.

But thanks to the heights crypto reached in the last boom, there’s still a great amount of earmarked funding sloshing around Silicon Valley’s coffers compared to previous seasons. Andreessen alum Katie Haun debuted her $1.5 billion crypto fund in March, while Coinbase co-founder Matt Huang launched a $2.5 billion vehicle in November. And while VCs might be more careful now about where they put their cash, it’s still got to be spent somewhere.

“None of these companies become mature for many years,” said Alston Zecha, partner at Eight Roads. “We’ve been spoiled over the last couple of years of seeing businesses get these amazing up-rounds after six or nine months. As the tide goes out, there’s going to be a lot of people who are found to be naked.”

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Bitcoin price: Crypto billionaire Winklevoss twins’ sing amid crash

Just days after announcing staff cuts amid a spiralling cryptocurrency crash, billionaire twins Cameron and Tyler Winklevoss have gone wild.

Just days after laying off 10 per cent of their staff amid a spiralling cryptocurrency crash, tech billionaires Cameron and Tyler Winklevoss have gone wild with a heinous rendition of Don’t Stop Believin’ that has broken the internet.

The twins – best known for accusing Mark Zuckerberg of stealing their idea for Facebook – covered the classic Journey tune at a New Jersey rock club after laying off staffers at their cryptocurrency start-up Gemini.

In a bizarre video of the gig, which has gone viral on Twitter, Tyler strains to hit the high notes while Cameron tackles a questionable solo on an electric guitar.

“Uh so I saw the Winklevoss twins’ band?” wrote an attendee who posted the video clip to Twitter, calling the show “by far one of the strangest and most tragically hilarious/infuriating things I’ve ever witnessed”.

The brothers also sold NFTs as band merchandise, according to the Twitter user who posted the video of the show at Asbury Park’s Wonder Bar.

In addition to Journey, the Winklevoss twins have also covered songs by Fall Out Boy, Blink 182, U2, Nirvana, Kings of Leon and The Killers, according to Page Six.

Announcing last week’s lay-offs, the crypto brothers cited difficulties related to “current macroeconomic and geopolitical turmoil” for forcing them to slash jobs for the first time since they founded Gemini in 2014.

“Today is a tough day, but one that will make Gemini better over the long run,” the brothers said in a note to employees while announcing the lay-offs.

“Constraint is the mother of innovation and difficult times are a forcing function for focus, which is critical to the success of any start-up.”

The staff cuts also came amid a lawsuit by the Commodity Futures Trading Commission accusing the company of making false and misleading statements concerning a bitcoin futures contract the firm was pursuing in 2017.

The brothers have also reportedly personally lost billions of dollars each during the ongoing crypto crash.

They had banked on a crypto comeback following the collapse of TerraUSD last month due to the rise of interest rates and recession fears.

The Sydney Morning Herald reported the brothers had their fortunes invested in crypto start-ups ranging from trading platform Slingshot to tax facilitator Taxbit.

According to their portfolios, the 40-year-old siblings have stakes in about 50 crypto or blockchain start-ups.

Bloomberg reports their fortunes have slumped to $3 billion each, from a high of $5.9 billion, as the cryptocurrency market continues to plummet amid fears of an impending recession.

Their business Gemini is not the only crypto start-up to cut staff as the market continues to tumble.

Crypto exchanges Coinbase and BlockFi are laying off hundreds of staff members, equivalent to a fifth of their workforces, as they struggle to survive.

On Monday, bitcoin – the world’s largest cryptocurrency token – reached its lowest level since December 2020 to trade at below $US23,000 ($A33,000). And on Tuesday, it was trading at $US22,130.40 ($A32,147.59). As of 8am today it has sunk to $US21,500 ($A31,231).

It’s a far cry from the coin’s all-time highs in November last year: Bitcoin was worth almost $US69,000 ($A100,000) while ether was $US4,865 ($A7067) at its peak, 70 per cent more than it is worth now.

Cryptocurrency has been facing a reckoning in recent weeks – and particularly the last few days – as fears mount over a global recession amid rampant inflation and the US central bank hiking interest rates.

On Friday, data found the USA’s inflation rate had reached a new high, rising to 8.6 per cent in May, the worst it’s been since 1981.

Over the weekend, cryptocurrency plunged in reaction to the news.

This Wednesday, the US Federal Reserve is expected to raise its interest rate to combat spiking inflation.

Economists predict the rate will be increased to settle on 0.25 per cent or 1.50 per cent for July, with the central bank doing something similar last month.

Cryptocurrency is closely aligned with the traditional stock market and over the last few days, markets like Dow Jones have tanked and entered a bear run.

– with Alex Turner-Cohen

Read related topics:Cryptocurrency

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Cryptocurrency Market Showing Signs Of Recovery Post Freefall

Cryptocurrency Market Showing Signs Of Recovery Post Freefall

After witnessing weeks of slump, the cryptocurrency market is showing signs of recovery

Some investors are now betting that bitcoin is bottoming out, judging by the money heading into listed cryptocurrency funds, which represent just a slice of the market yet are popular among institutional and retail players alike.

Overall flows into such funds turned positive last month, with a weekly average inflow of $66.5 million, a reversal from a dismal April when they saw a weekly average outflow of $49.6 million, according to data provider CryptoCompare.

“It’s largely institutional, and to a degree retail investors, recognizing that the pain is already endured, and we’re closer to the bottom than we are to the top,” said Ben McMillan, chief investment officer of Arizona-based IDX Digital Assets.

“If you’re getting into crypto at these levels, a little near-term volatility could be worth a long-term payoff,” he added. “A lot of institutional investors are starting to look at crypto as a source of longer-term growth potential.”

It’s hard to know whether the tentative flows will last, though, or if the nascent trend will be replicated across the wider market.

Many people will also think twice before piling into the market again, having been mightily clobbered as crypto was buffeted by worries over global monetary tightening and rising inflation. Bitcoin has lost roughly half its value since a November peak, it is down by a third in 2022 and has been languishing at around $30,000 for a month.

The data from funds nonetheless indicate some investors are returning to crypto, albeit into the perceived safety of exchange-traded products (ETP) with their promise of greater liquidity and security.

The assets under management of several bitcoin-futures ETFs have risen in the past week, according to Kraken Intelligence. The assets of the ProShares Bitcoin Strategy ETF’s have grown 6 per cent, while those of the Global X Blockchain & Bitcoin Strategy ETF and VanEck Bitcoin Strategy ETF have climbed over 3 per cent.

By comparison, ProShares’ bitcoin fund saw outflows of over $127 million in April.

The bullish trend has extended into June, with global bitcoin ETP holdings jumping to an all-time high of 205,008 bitcoin in the first two days of the month, Norway-based crypto research firm Arcane Research found.

“This is a promising sign for what’s to come,” said Arcane analyst Vetle Lunde.

In an indication investors are being selective and cautious, only bitcoin funds have received inflows while funds focused on ethereum and other crypto still experienced outflows.


But let’s not forget, while the fortunes of some funds may potentially be turning up, most have posted poor returns this year as the crypto market has tanked.

US digital assets funds have lost 46 per cent on average so far in 2022, posting losses of 22 per cent in May, according to Morningstar.

All listed digital asset investment products tracked by CryptoCompare lost money in May, with the worst performer being Grayscale’s Digital Large Cap Fund product, with a 38.5 per cent fall.

“Bitcoin has been rangebound in concert with the broader market activity of late, investors are looking for a bottom and are uncertain where that is,” said Jack McDonald, CEO of PolySign, which specializes in digital asset custody solutions for institutional investors.

Shares of the Grayscale Bitcoin Trust one of the biggest bitcoin funds with over $19 billion in assets, are trading at a 29 per cent discount to net asset value, around its steepest discount since inception and indicative of low demand for the product.

And despite the pick up in May, many market watchers expect inflows to crypto funds to remain subdued until macroeconomic and regulatory risks become more clear.

“We’re waiting for a high conviction bid to come back into the markets,” added McMillan at IDX. “There’s still a lot of wood to chop on the macro front.”

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Cryptocurrency Platform CoinTracker Enters Indian market

Cryptocurrency Platform CoinTracker Enters Indian market

CoinTracker has announced its foray into the Indian market

New Delhi:

Cryptocurrency portfolio tracking and tax compliance platform CoinTracker on Wednesday announced its foray into the Indian market.

The company’s move also comes against the backdrop of the government mandating a 30 per cent taxation on such transactions with effect from April 1.

Starting today, the crypto tax compliance and portfolio tracking products will be available to all crypto users across India, it said, while announcing the launch of its product in the country.

CoinTracker said users in India can now deal in crypto assets without worrying about the challenges associated with tracking, reconciliation, accounting and compliance.

“It can be challenging for folks to navigate the complexity of buying, holding and transacting with cryptocurrency and nearly impossible to comply with taxes without the right tool. We built CoinTracker to solve this problem seamlessly and are excited to deliver our offering in India.

“We plan to rapidly expand our integrations and partnerships with all the popular exchanges and tax products used in India in the coming months, and ultimately work together to help enable mainstream adoption of cryptocurrency in India,” Jon Lerner, CEO of CoinTracker, said.

The company recently received a $100 million Series A funding which it is using it to build products and expand into regions like India.

Lerner said the company will also expand its employee base in India. With 65 employees globally, Lerner said CoinTracker will recruit over 200 people in a year’s time, of which 10 per cent will be from India.

CoinTracker said the crypto ecosystem has grown from zero to $2 trillion in its first decade and is on a trajectory to surpass $10 trillion in the next decade. 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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Terra Luna Price Surge By Nearly 60% In Recovery After Horrid Week

Terra Luna Bounces Back During Weekend After Crash

Do Kwon, a South Korean who graduated from Stanford University, is the creator of TerraUSD

Cryptocurrency TerraUSD surged to $0.08003 and its sister crypto coin Terra Luna price increased to $0.0001949 in the last 24 hours, as per Coinmarketbase, after seeing an almost 100 per cent crash earlier this month. TerraUSD price increased by 20 per cent while Terra (Luna) surged by around 18 per cent in the past 24 hours, as on Monday.

Terra Luna witnessed a 100 per cent surge over the weekend and is still up around 60 per cent on Monday, as per the data from CoinMarketCap.

Stablecoin TerraUSD and its sister coin Terra (Luna) witnessed a massive crash in price earlier this month resulting in a bloodbath in the cryptomarket. TerraUSD collapsed almost 100 per cent from its $1 value and it also pulled down Luna with it. Luna’s fall started when TerraUSD lost its peg to the US dollar. As the two token prices are linked Luna’s price also plummeted.  

The near wipe out of TerraUSD and Terra (Luna) coins also cost many investors millions of dollars. The assets of Binance, the world’s largest cryptocurrency exchange by daily trading volumes, in Luna fell to just $2,200 from $1.6 billion.

Luna’s market value dropped to about $840 million from over $20 billion before the TerraUSD crash.

According to blockchain analytics firm Elliptic, TerraUSD and Luna investors lost around $42 billion. The crash of these two coins also affected the price of almost all cryptocurrencies. The largest cryptocurrency, Bitcoin, lost around a quarter of its value between May 9 and May 12. 

TerraUSD gained popularity earlier this year after Luna Foundation Guard, a charity organisation affiliated to Terraform Labs, the creators of the crypto coin, pledged to collect $10 billion worth of Bitcoin to support its dollar peg. TerraUSD maintains its peg through an algorithm that moderates the crypto coin’s supply and demand in a complex way linked to the use of its sister token Luna.

Do Kwon, a South Korean who graduated from Stanford University with a degree in computer science, is the creator of TerraUSD and its native token Luna. Kwon faced lawsuits in South Korea after the crash of TerraUSD and Terra (Luna). Five South Korean crypto investors filed criminal complaints against him and his Terraform co-founder Daniel Shin, alleging fraud and violations of financial regulations.  

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Citadel Securities Chief Hints At Entering Cryptocurrency Market

Citadel Securities Chief Hints At Entering Cryptocurrency Market

Ken Griffin, founder of Citadel Securities said he is looking at exploring cryptocurrency space

Ken Griffin, the billionaire founder of Citadel Securities, one of the world’s biggest market-making firms, said on Monday he envisions the company entering the cryptocurrency market as a combination of a liquidity provider and an exchange.

“Given the institutional increase in interest in cryptocurrency, I think it’s reasonable to expect to see us be more involved in the crypto space providing liquidity to institutional and potentially retail investors,” Mr Griffin said at the Milken Institute Global Conference in Los Angeles.

While some market makers – firms that provide market liquidity by streaming buy and sell quotes for others to trade against – such as Virtu Financial, Jump Trading and DRW, have embraced the nascent asset class, Citadel Securities has largely stayed on the sidelines.

Mr Griffin in October called cryptocurrencies “a jihadist call that we don’t believe in the dollar.”

But on Monday he said that while he is skeptical about cryptocurrencies, he has to live with the reality that an asset is worth what people perceive it is worth.

“I also collect American abstract art,” he said. “Why is a painting worth $10 million? It’s oil on canvas. So value is in the eyes of the beholder.”

Citadel Securities, which after a funding round in January was valued at nearly $22 billion, is not rushing its entry into the crypto market, because it wants to ensure very high standards around things like anti-money-laundering, Mr Griffin said.

The company will aim to provide liquidity to the crypto market, but Mr Griffin also said Citadel Securities believes crypto exchange technology is “very important” in helping to bring buyers and sellers together.

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People with ‘dark’ personality traits are more enthusiastic about cryptocurrencies

Since the invention of Bitcoin in 2009 the global cryptocurrency market has grown from nothing to a value of around $2 trillion. From a price of $1 in 2011, Bitcoin rose to an all-time high of more than $63,000 in April 2021 and now hovers around the $42,000 mark.

Large fluctuations in cryptocurrency prices are common, which makes them a highly speculative investment. What kind of people are willing to take the risk, and what motivates them?

We conducted a survey to find out. In particular, we wanted to know about the relationship between the so-called “dark tetrad” personality traits and attitudes towards cryptocurrency.

Dark tetrad

In psychology, the “dark tetrad” refers to a group of four personality traits. These are Machiavellianism, narcissism and psychopathy (together known as the “dark triad”), plus sadism.

They are called “dark” because of their “evil” qualities: extreme selfishness and taking advantage of others without empathy. The dark tetrad are also often related to risk-taking behaviours.

Appeal of cryptocurrency

We identified two main areas of appeal. First, the high risks and high potential returns of crypto trading make it attractive to the kind of people who like gambling.

Second, cryptocurrencies are not issued or backed by governments like traditional or “fiat” currencies. This makes them attractive to people who distrust the government.

Crypto buyers’ personalities

We asked 566 people to complete online personality surveys as well as answer questions about their attitudes to crypto and whether or not they planned to invest in it. Of our participants, 26% reported they own crypto and 64% showed interest in crypto investing.

We measured their dark tetrad traits using standard psychological tests. We also measured traits that might connect the dark tetrad to judgements about crypto: fear of missing out (the feeling that others are experiencing better things than you are), positivity (the tendency to be positive or optimistic in life) and belief in conspiracy theories.

Reason to invest

A common reason to invest in crypto is the hope of earning high returns. Beyond the desire to build wealth, our research shows dark personality traits also drive crypto buying.

Machiavellianism is named after the Italian political philosophy of Niccolò Machiavelli. People who rate highly on this trait are good at deception and interpersonal manipulation.

Machiavellians take a calculated approach to achieving goals, and avoid impulsive decisions. They are less likely to engage in problem gambling.

Machiavellians also tend to believe strongly in government conspiracies. For example, they often believe politicians usually do not reveal their true motives and that government agencies closely monitor all citizens.

We found Machiavellians like crypto primarily because they distrust politicians and government agencies. Many crypto supporters believe governments are corrupt, and crypto avoids government corruption.

Overconfidence and positivity

Narcissism is a self-centred personality trait, characterised by feelings of privilege and predominance over others. Narcissists are overconfident and are more willing to do things like making risky investments in the stock market and gambling.

Narcissists tend to focus on the positive side of life. We found narcissists like crypto because of their great faith in the future, and because of their confidence their own lives will improve.

Impulsive psychopaths

Everyday sadism relates to a personality enjoying another’s suffering. Sadists often display aggression and cruel behaviours. For example, sadists troll others on the Internet for enjoyment.

At first glance, buying crypto is unlikely to harm others. However, we found sadists like crypto because they do not want to miss out on investment rewards either. To them, perhaps both the pleasure from seeing another’s pain and the fear of missing out are related to selfishness.

Unlike narcissists, we found both psychopaths and sadists lack positivity about their prospects, which cancels out their liking of crypto.

Dark tetrad personality traits influence positivity, conspiracy beliefs, and fear of missing out, which in turn influence attitudes to cryptocurrency. Photo credit: Wes Mountain/ The Conversation, CC BY-ND

Psychological lens

Studying cryptocurrency through the psychological lens of the dark tetrad offers insight into why people want to buy crypto. We are not suggesting that everyone interested in crypto displays dark tetrad traits.

We studied only a subset of people interested in crypto who do have these traits. If you happen to be a Bitcoin or other crypto holder, you may or may not exhibit them.

If you want to know how you score for dark tetrad traits, you can do the Dark Triad Personality Test and Sadism Test online.

Di Wang is a Senior lecturer and Brett Martin is a Professor of Marketing at the Queensland University of Technology.

Jun Yao is a Senior Lecturer in Marketing at the Macquarie University.

This article first appeared on The Conversation.

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