For Jeremy Fong, U.S. crypto lender Celsius was an ideal place to stash his digital currency holdings - and earn some spending money from its double-digit interest rates along the way.
"I was probably earning $100 a week," at sites like Celsius, said Fong, a 29-year civil aerospace worker who lives in the central English city of Derby. "That covered my groceries."
But now Fong's cryptocurrency - about a quarter of his wallet - is stuck at Celsius.
The New Jersey-based cryptocurrency lender froze withdrawals for its 1.7 million customers early last month, citing "difficult" market conditions. That resulted in a sell-off that wiped hundreds of billions of dollars from the paper value of the cryptocurrencies globally.
Long-term, Fong's cryptocurrencies are now declining by 30%. "Definitely in a very uncomfortable position," Fong told Reuters. "My first instinct was to withdraw everything [from Celsius]," he said.
The Celsius crush last month was followed by the collapse of two other key crypto signals that shook the cryptocurrency sector, which is already under pressure as rising inflation and interest rates prompt a flight from stocks and other higher-risk assets.
Rising Inflation and Interest Rates Rock Cryptocurrency Sector
Jeremy Fong, a cryptocurrency investor. Photo: June 17, 2022 /Handout via REUTERS.
Bitcoin fell below $ 20,000 on June 18 for the first time since December 2020. This year it has plummeted 60%. The overall cryptocurrency market fell to around $900 billion from a record $3 trillion in November.
The crash hurt and confused individual investors around the world. Many were angry at sites like Celsius. Some have promised never to invest in cryptocurrencies again. Some, like Fong, want stronger control over the freewheeling sector.
Susannah Streeter, an analyst at Hargreaves Lansdown, compares the turmoil in dotcom stocks, which collapsed in early 2000 - with low-cost technology and capital making it easier for individual investors to access cryptocurrencies.
"We've got this collision of smartphone technology, trading apps, cheap money and a highly speculative asset," she said. "That's why you've seen a meteoric rise and fall."
Cryptocurrency lenders such as Celsius offer high interest rates to private investors who deposit their crypto coins on the sites. This often unregulated creditor then invests in deposits in the wholesale cryptocurrency market.
Celsius' problems seem to be related to investing in wholesale cryptocurrencies. Because these investments were slow, the company was unable to meet client redemptions from investors amidst the wider cryptocurrency market crash.
The redemption freeze at Celsius was akin to a small bank shutting its doors. But a traditional bank, overseen by regulators, would have some form of protection for depositors.
One of the people affected by the Celsius freeze was 38-year-old Alisha Gee from Pennsylvania. Since 2018, Gee invested "every last bit" of her paycheques in cryptocurrencies, with her crypto investments building up into a five-figure sum.
Gee has deposits of $ 30,000 in Celsius - part of her total cryptocurrencies held - earning her an interest of $ 40 -100 a week, which she hoped would help her pay off her mortgage.
But Gee received an email from Celsius that she could not make withdrawals. "I walk in the dark at 2 o'clock in the morning, over and over again," she now says.
"I believed in the company," she said. "It doesn't feel good to lose $30,000, especially that I could've put towards my mortgage."
Nonetheless, Gee said she would continue to use Celsius, saying she was "loyal" to the company and hadn't experienced problems before.
Celsius CEO Alex Mashinsky tweeted on June 15 that the company was "working non-stop," but has given few details of how or when withdrawals would resume. Celsius said on Monday it was aiming to "stabilize our liquidity and operations."
Enthusiasm for Crypto Still Undimmed for Some
"Now I see a lot of bear market cycles, so I avoid all the shocking reactions, "said Sumnesh Salodkar, 23, of Mumbai, whose cryptocurrency is low but positive.
For others, warnings from regulators across the world about the risks of dabbling in crypto have become reality.
Halil Ibrahim Gocer, a 21-year-old from the Turkish capital Ankara, said his father's $5,000 cryptocurrency investment had dropped to $600 since he introduced him to the cryptocurrencies.
"Knowledge can only take you so far in crypto," said Gocer. "Luck is what matters."
Another investor, a 32-year old IT worker in Mumbai, said he poured three-quarters of his savings - several hundred dollars - into crypto. Its value has plummeted by around 70%-80%.
"This will be my last investment in cryptocurrencies," he said, requesting anonymity.
Regulators in countries around the world have been working out how to build crypto guardrails that can protect investors and dampen risks to wider financial stability.
The crypto market turmoil sparked by Celsius highlights the "urgent need" for crypto rules, a U.S. Treasury official said last week.
Fong, the UK investor who has lost access to his crypto at Celsius, wants things to change.
"A bit of regulation would be good, essentially. But then I think it's a balance," he said. "If you do not want too much regulation, this is what you get" he said.