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Breaking News: ‘Crypto Week’ Takes A Hit: US House Fails To Advance Key Acts

How Celsius Founder Lost Millions In Crypto By Taking Over Trading Strategy

Reynaldo Marquez
Reynaldo Marquez
2 years ago
3 mins read
Bitcoin BTC BTCUSDT

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A new report from the Financial Times has shed more light on the downfall of the crypto lending company Celsius Network. Founded by Alex Mashinsky, the company has been affected by the downside trend in the sector and was forced to halt all operations, negatively impacting their clients, and filed for bankruptcy.

Related Reading: Shiba Inu Trends Upwards Through Strong Whale Accumulations

The report claims that Mashinsky took over the company’s trading strategy back in January 2022. At that time, the price of Bitcoin was hovering around $35,000 to $40,000, and the crypto market was coming out of a major downtrend to find support at these levels.

The crypto market went on to trade sideways for over a month, and to move inside a tight range with Bitcoin bottoming at the mid area around $30,000. Aware of the company’s financial situation, and looking to make up for its losses, according to the report, Mashinsky was ready to make a significant bet on the price of Bitcoin.

In January, the U.S. Federal Reserve (Fed) was about to announce its shift in monetary policy to slow down inflation. The financial institution hinted at an interest rate hike regime with a decrease on their balance sheet.

Mashinsky was betting on the crypto market trending lower on the back of these announcements. Therefore, he sold “hundreds of millions of dollars’ worth of bitcoin” expecting to buy it back at a discount, but the market moved in the opposite direction.

According to the Financial Times, Celsius was forced to purchase their crypto holdings at a loss when BTC and other assets rallied. The sector eventually saw significant losses, but Mashinsky and his team made wrong assumptions about the timing of the crypto crash, the report claims to cite multiple people familiar with the matter:

He was ordering the traders to massively trade the book off of bad information. He was slugging around huge chunks of bitcoin.

Celsius Lost Billions In Crypto By Trading These Products

Mashinksy’s involvement in his trading department caused conflict among the staff, the Financial Times said. The company’s former Chief Investment Officer (CIO) Frank van Etten questioned Mashinsky’s trade and his participation in making investments decision.

The executive left the company in February 2022, most likely due to his clashes with Mashinsky. The Financial Times claims that there was a span of two days between Celsius selling their Bitcoin and buying it again at a loss.

If the company have waited longer, they could have profited from the crash in the crypto market, but as another person familiar with the matter said, Celsius was trading based on conjectures:

It was not an irrational thought. There was a lot of speculation (…).

Celsius was already dragging losses from 2021, the report said. By September 2021, Celsius was holding over 11 million shares or $400 million in the Grayscale Bitcoin Trust (GBTC).

The investment product was trading at a premium compared to BTC’s spot price. This trend inverted and the GBTC began trading at a discount from Bitcoin.

Mashinsky was offered a deal to mitigate their losses but passed on it, expecting the GBTC to reclaim its premium. The company’s losses were exacerbated by this decision and amount to over $100 million.

Related Reading: XRP Sluggish At Resistance – Will It Break Out After 2 Months Of Vertigo?

At the time of writing, the price of Bitcoin (BTC) trades at $23,800 with sideways movement over the past week.

Crypto Bitcoin BTC BTCUSDT
BTC’s price moving sideways on the 4-hour chart. Source: BTCUSDT Tradingview
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Reynaldo Marquez
Reynaldo Marquez

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Created by industry experts and meticulously reviewed
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