What's up guys, it's graham here, so i don't think this is a video that anyone wants to make and i've been holding off from talking about this while we wait for any new developments, but i think enough time has passed to share my thoughts about what's going On and hopefully come to a resolution after the crypto platform celsius, disabled withdrawals and locked away more than 11 billion dollars of assets, with the likelihood that its depositors will never see that money returned. So here's what you need to know why the situation is quickly becoming a huge problem and how the entire market is at risk of irresponsible loans that need to come to an end. Sooner than later. All of that and more on this episode of everything that gary ginsler hates about cryptocurrency, okay, no, but seriously before we go into the video.

If you appreciate the complete transparency, along with the willingness to risk my own money, to be able to talk about every platform, that's out there with first-hand experience, it would mean a lot to me if you either hit the like button or subscribed. If you want to see how this plays out, so thank you guys so much for doing that, and also big thank you to elizabeth warren for sponsoring this video just kidding guys uh video doesn't have a sponsor, and now, let's begin all right. So, to begin for those unaware celsius was started as a way to put their community first with military-grade security, next level, transparency and a do-it-all app designed to help reach your financial goals. I mean in hindsight it's pretty ironic, that they've disabled withdrawals and have come full circle from their first post, saying if you don't have free and unlimited access to your own funds, are they really your funds, but i digress.

Celsius is a platform where users could earn interest on their cryptocurrency deposits or borrow money against more than 40 different assets, and on the surface, that business model isn't exactly unusual. You deposit your cryptocurrency within their earn feature. They lend it out at a higher interest rate for those who want to borrow and they pay you back a portion of their profits, ranging anywhere between 1 and 12. Banks do something similar on a much much much much smaller scale, so it makes sense to extend that feature to different assets right well, not quite even though interest bearing accounts became a common practice throughout the last few years, with places like block 5 voyager binance and Anchor all offering a variation of a similar service celsius, on the other hand, may have taken it too far.

Now coffeezilla posted a video the other day where he made a great point. Celsius was paying out nearly as much money as they were earning from interest payments or 80 percent of how much they make, which would put them in a difficult position. Should the market fall and they not have the liquidity to pay back their users. However, one of the first signs of trouble came in april of this year when the sec ruled that only accredited investors or those currently on the earned platform would be able to earn rewards, along with several states who opened up an investigation into the inner workings of Celsius alleging that they've crossed over into the world of offering securities of course, celsius denied those claims saying that they wholeheartedly disagree with the allegations being made and that we always have and will continue to work with regulators in the us and globally to operate in full Compliance with the law, at the same time, other crypto lending features, began to face similar scrutiny with coinbase block from being able to offer their services, along with block fi agreeing to pay a 100 million dollar settlement.

At the same time of an investigation into krypto.com. The issue comes with the concern that crypto lending should be classified clearly as a security and therefore regulated as such, which it isn't now. Each platform alleges that they operate differently and that a currency shouldn't be called a security. But whatever the reason, the sec believes there to be a risk to investors and so they're cracking down.

However, that is just the very beginning because, while other platforms have not had any liquidity issues, celsius is at risk of a complete collapse. This all allegedly begins with. What's called staked eth, which allows users to deposit ethereum as a validator for a fixed interest rate. Under this scenario, users could deposit one ethereum into a platform like lido and get back.

One stake teeth equal to the amount that they deposited. It's really no different than you lending me one dollar in cash and me giving you back an iou for a dollar that could be redeemed. One to one well celsius allows you to stake your stake eth, while they could potentially take those holdings and then borrow against it for an even higher return to help pay you back with even higher rewards. This business model works, while the price of one ethereum is equal to that of one staked, but as the entire market dropped over these last few months, too many people began swapping out their staked ethereum, all at once, causing the price to depeg from its one-to-one ratio And leading celsius in a predicament where maybe they don't have the liquidity on hand to pay their users the amount that they want to withdraw, causing them to halt all transactions until they come up with a solution.

Since then, they've hired a law firm who consults in company restructuring and bankruptcy, but ultimately the responsibility comes down to the individual user as soon as you sign off on their terms of service in the fine print celsius makes it clear that they may lend sell pledge. Hypothecate assign invest, use, commingle or otherwise dispose of assets that are not held in the custody wallet. You agree and acknowledge that you're exposed to the possibility that celsius may become unable to repay its obligations to you in part or in full, in which case any digital asset in your celsius account that are not using the custody service may be at risk of partial Or total loss, basically it's the wild wild west and since your money is not protected by fdic or sipc insurance you're out of luck, though anecdotally, i do find it amusing that, when the sec threatened to sue coinbase over their earned feature, people complained that they were Getting in the way and preventing people from getting yield, providing liquidity farming and staking, but once the money is lost, people say that the sec should have been involved sooner. So, unfortunately, you could only pick one at this point.

I don't want to give any false hope or promises to anyone who has money on the platform, but i probably wouldn't hold out or make any plans about having any access to those funds. So in terms of my own loss, it stings, but it could have been worse from the very beginning. I've made a strong point to only invest a small part of my portfolio in an equal combination of bitcoin and ethereum. That's it.

What started off, as one percent grew to three percent and at its peak it was about seven percent of my net worth, although having been through the 2017 crypto bull run and collapse, along with an unsuccessful crypto hack attempt, i made sure to never become too reliant On just one platform or an exchange, and therefore i used five with varying amounts in each. Since i talk very openly about which brokerages i like and use, as well as reference different options in the market like, for instance, ftx us, where you could get all the way up to a hundred dollars, a free, crypto and use the link down below in the Description with the code, graham, depending on how much you trade, it just made sense to me that i would try a little bit of everything, and that way when i talk about something i'll have had first-hand experience with it, and you know, like i mentioned celsius, is One of them now, i'm extremely familiar with the phrase, not your keys, not your coins referencing, the fact that unless you own the wallet, your crypto's at the mercy of the exchange it's held on, but i knew the risks and mentally i prepared that any money i Put into crypto could potentially be worth nothing if it's worth something in the future as a way to diversify my portfolio great, if not it's a relatively small amount in proportion to everything else. So it's nothing to worry about. In this case, i regret to say that i did have some of these funds in celsius using their earned feature at two to five percent interest and because those funds could be commingled with other riskier options.

A portion of my holdings were caught in the crossfire, along with everybody else. Thankfully, it's an amount that i don't lose any sleepover and it's a small portion of my overall cryptocurrency portfolio, simply the cost of doing business for the sake of research. But that does not excuse the fact that one many people have invested their life savings and way too much money that they can afford to risk and two it's an area that needs strict regulation to prevent this from happening ever again. For example, another lender finblocks had just capped, withdrawals to 500 a day and 1500 a month for all users, and if the cryptocurrency market continues to follow, we could see the unraveling of interest-bearing accounts that only work until they don't crypto.

Hedge funds are not doing well either with 3ac, also facing an insolvency crisis and mike novogratz calling for two-thirds of those hedge funds to go to business either way. The reality is anytime, you earn above the average. You take a risk in direct proportion to your chances of losing money. In this case, even a one percent return was unsustainable when those assets are pledged against high-yield cryptocurrencies, potentially backed and pledged against an extremely volatile market, and unless your money is protected by fdic or sipc insurance, there's always a risk, even if it's extremely small that it's Not going to turn in your favor in this case, the way i see it celsius is simply just stalling for time, while they figure out a way to resume operations, but depending on their financial situation, it might be too late sure they might be able to find A lender to cover withdrawals but who, in their right mind, would lend the money.

Maybe they find a bigger fish to buy them out, but that's a delicate legal process and it could be months if not years before, people get access to their money. The best case scenario is that they magically come through with their liquidity, but even then it's safe to say that they've already ruined their reputation and as much as i would like not to lose money, it's not an easy fix. Once the lawyers get involved, it's not easy as saying we can afford to pay everyone back, uh 80 percent of their money. So there you go.

Take it uh lesson learned it's a drawn-out process through the legal system and it's up to the courts to decide. What's going to happen, this is a risk when it comes to cryptocurrency that, in the event of bankruptcy, their funds are not protected. This was a new disclosure set by the sec in regards to public companies that hold crypto assets on behalf of others, and i think, even if the chance is extremely small, that people make themselves aware that this can happen. That's why the safest, crypto storage is to simply take your coins off an exchange and only invest an amount that you're comfortable with losing.

For me, i'm comfortable risking five percent of my entire portfolio spread throughout multiple exchanges. I never keep more than 20 of it in one place, and i've accepted that it's probably going to be worth nothing that way. Anything i make is a bonus and i don't count that money towards anything meaningful. This needs to be emphasized, because, when i see articles about how gen z and millennials are turning to cryptocurrency as a way to retire, it makes me nervous that they're investing in something without understanding the full repercussions.

And that is why i'm making this video today and by the way i want to make it clear that i do wish celsius all the best, and i really wish they could make it out of this mess. So i'm going to be going down to their headquarters. To see if i could help them out dear celsius feel better wishing you a speedy recovery of all customer fonts, yours truly, graham and the like button. So with that city guys.

Thank you so much for watching also feel free to add me on instagram, as well as get a free stock down below in the description when you sign up for public using the code gram, because that could be worth all the way up to a thousand dollars. You may as well do it and i'm also posting my own thoughts on the market there every single week. So if you want to be a part of it, link is down below. Thank you so much for watching and until next time.