StrikeX

Barely has the dust settled on the collapse of Terra USD ($UST) and the crypto world is left reeling from yet another crisis. This time the crypto lending service Celsius teeters on the edge; leaving retail investors disillusioned and out of pocket once more. But what has brought this former golden child of crypto, who managed over $20 billion of assets at its peak, to the brink of insolvency?June 13th – Celsius announces the suspension of withdrawals, swaps &amp; transfers across the network, citing hostile market conditions. This announcement was followed by a 40% drop in their native token, CEL. Shortly after, the main Celsius defi wallet was seen to be sending $320M dollars of ETH to the FTX exchange, further fuelling speculation that Celsius was facing a liquidity crisis.The freezing of 1.7 million customers funds has not gone unnoticed by state securities regulators. According to a report by Reuters (released 16th June), Texas State Securities Board director of enforcement division Joseph Rotunda stated, “I am very concerned that clients — including many retail investors — may need to immediately access their assets yet are unable to withdraw from their accounts,” he added, “The inability to access their investment may result in significant financial consequences.&#34;Many see the unsustainable yields offered by Celsius as a key factor in the ongoing crisis, with the company seemingly forced to take high risk strategies to fund staking rewards of up to 17%. Speaking at a recent investor conference, Gary Gensler, chair of the SEC said, &#34;We&#39;ve seen again that lending platforms —they’re operating a little like banks, they&#39;re saying: Give us your crypto, we&#39;ll give you a big return…How does somebody offer 4.75% in the market today and not give a lot of disclosure?” The SEC chair added: “If it seems too good to be true, it just may well be too good to be true.&#34;As details continue to emerge about the on-going debacle at Celsius, we should be asking how best to protect retail investors from being caught up in such onslaughts. Two steps the crypto industry must take are more stringent regulation and better education.For example, at StrikeX we offer a 10% APY on staked tokens, unlike Celsius, these rewards are paid directly from a dedicated pool and are not reliant on high-risk strategies to fund them. Promising high yields which are dependent on a company’s ability to profit from your cryptocurrency is an unsustainable business model that many would avoid entirely if they knew it was happening. Transparency is key for allowing would-be investors to make informed decisions and better protect their hard-earned cryptocurrency.In addition to offering better educational content, focussing on the plethora of financial products now available in the DeFi space, stricter regulations can be implemented to help retail investors avoid future pitfalls akin to Terra &amp; Celsius.— Joe Jowett (CEO of StrikeX)

The Downfall of Unsustainable Yield-Protocols: Terra Luna & Celsius

StrikeX

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