Peering Behind An 18% Yield
Bloomberg Businessweek|January 31, 2022
Celsius promises big rewards if you let it hold your crypto. The risks you’re taking aren’t clear
Zeke Faux and Joe Light
Every Friday, Alex Mashinsky sits in front of a video camera and livestreams for more than an hour with a sales pitch for his crypto company, Celsius Network LLC. Send money to Celsius, he says, and he’ll make you rich by paying you interest of as much as 18% a year.

“The beauty of what Celsius managed to do is that we deliver yield, we pay it to the people who would never be able to do it themselves, we take it from the rich, and we beat the index,” Mashinsky said during one stream in December. “That’s like going to the Olympics and getting 15 medals in 15 different fields.”

Celsius is effectively a bank for cryptocurrencies—though it’s not regulated as one. Users deposit their Bitcoin, Ethereum, or Tether and receive weekly interest payments. But the rates Celsius pays are tens or hundreds of times higher than what conventional banks pay on savings accounts. Its assets more than quadrupled last year, to $25 billion. Mashinsky tells his users—he calls them “Celsians” and says there are more than a million of them—that with Celsius they can stick it to greedy banks and help the less fortunate, and they shower him with praise for helping them make enough money to pay off their debts or even quit their jobs. Last year, Celsius raised an additional $750 million from investors including Canadian pension fund Caisse de Dépôt et Placement du Québec. The valuation of the funding round—about $3 billion—made Mashinsky a billionaire on paper.

With Bitcoin and other cryptocurrencies crashing, even the fat yields Celsius offers may be looking less dazzling. Since deposits are held in cryptocurrency, users are at risk when prices drop. And they’re not covered by federal deposit insurance. Celsius says its assets had declined to $18.1 billion as of Jan. 21, and Mashinsky has been telling customers not to panic, the bottom is near.

Celsius is just one of many crypto-lending platforms attracting deposits by offering high rates, all paid in cryptocurrencies. Celsius’s rates vary depending on the currency and other factors— about 3% to 8% on Bitcoin, 4% to 7% on Ether, 9% to 11% on Tether, and its top rate of 18% on a coin called Synthetix. Investors get the highest rates if they accept yields in a token called CEL. Celsius says it’s able to pay such rates because it invests the deposits and earns even bigger returns, in part by lending cryptocurrency to traders, who are willing to pay high rates to use it for bets. Roshun Patel, vice president for institutional lending at Genesis, a New York-based firm that also makes crypto loans to traders, says going rates for Bitcoin loans are 2% to 4%, with loans of stablecoins such as Tether costing more like 10%—which could be enough to cover what Celsius promises to pay depositors.

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