Celsius Network Weekly AMA– September 25, 2020

With Alex Mashinsky and Zach Wildes, Community Manager

This week’s AMA begins with some updates from Alex, followed by community questions. As always, the timestamp from YouTube is hyperlinked to each question below.

Summary: Alex starts with some updates, including the very exciting news that for the first time (but certainly not the last), Celsius paid out over $1 million in weekly interest payments. UNI was approved by Celsius’ finance committee to be added to the app, and so it is only a matter of technical implementation before users are able to deposit and earn interest on their UNI tokens. Flare’s Spark distribution will now officially support all Celsius users holding XRP in their wallets, and Alex also clarified that Celsius had no plans to touch any of their $22 million from the equity round– this is purely to be used as a rainy-day fund. Finally, Celsius has negotiated bank transfer rates lower again, with ACH still at 0.1% and SEPA now down to 0.5%.

Looking to the future– Alex stated that Celsius has applied for licenses to allow fiat withdrawal from the app, and is waiting for these to be approved. Additionally, Celsius is still developing a program to allow US accredited investors to earn in CEL through BnkToTheFuture. Alex also mentioned that viewing Celsius equity holdings in the app would be a good idea, but wouldn’t be implemented until Celsius releases separate native versions of the app for iOS and Android– likely in the next 6–12 months. And finally, regarding higher LTV options for borrowing against CEL– Alex said that while Celsius will implement these eventually, they are waiting until CEL token has a higher trading volume on more exchanges to help protect borrowers against sudden fluctuations in price.

Finally, Alex spoke a bit about what will happen with the 25 million CEL locked for employees after CEL token’s price stays above $1.50 for 10 days. These tokens already exist and will not be minted– no more tokens can be minted as CEL has a fixed supply. However, if Celsius employees agree to lock up their tokens for a year or more, they get a bonus for doing so. Once Celsius has this data on how many tokens will be released immediately vs over 1–3 years, they will release this to the community. Additionally, a great place to view stats about Celsius is Celsians– a community-driven website that monitors Celsius’ wallets and generates visualizations of this data.

And if you’d like to earn interest on your crypto, gold, and stablecoins with Celsius, scroll to the end for instructions on how to get $20 in BTC when you sign up.

Celsius Updates

1. Do good before you do well. If you look at the Forbes 400– the pillars of the American economy– many of these people have created their wealth through products that are not good for you (soda, processed food) or by extracting their value at the expense of the Earth (mining, gas/oil). Very few of the people on this list created good for society and then created wealth– this is much harder and requires much more work. Blockchain creates an opportunity here that was not available before– and while Celsius is one company doing this, I think over the next few years we will see many more companies doing this.
2. CEL token continues to perform. CEL has performed 10x better than if you held your wealth in BTC or USD over the past year. So if you earned interest on your BTC for the past year, you did very well– but if you earned in CEL, you did ten times better! This is also the first week ever that Celsius will be paying out over $1 million in interest– and this number continues to increase every week. CEL token has also now produced 24 millionaires– and as the price of CEL token rises, so will this number.
3. $2 Trillion in SARs from your friend, the bank. Just this past week, BuzzFeed News, in collaboration with news outlets from around the world, broke several stories around what are being referred to as the FinCEN files. These are leaked documents from 2000–2017 that detail Suspicious Activity Reports (SARs) that banks filed on many known or suspected money laundering schemes and other suspicious activity. Essentially, the banks would “report” these activities with the SARs to absolve themselves of legal liability, then continue transacting for users they knew were engaged in fraud, money laundering, and other crimes– because they wanted to keep profiting from it. We’ll say it again, for those in the back– banks are not your friends, and they never will be.
4. Partnership with LINE is live. LINE has hundreds of millions of users who will now be exposed to cryptocurrency. This is a very big deal and is an extremely bullish sign for worldwide cryptocurrency adoption.
5. Bank transfer fees go lower. Celsius had already negotiated ACH transfer rates down to 0.1% with their provider, Gem, and has now lowered the SEPA fee down to 0.5%. We believe these are the lowest bank transfer rates in the industry to purchase crypto– we couldn’t find them cheaper anywhere else.
6. Banks make record profits by charging you fees. Last year, JP Morgan Chase made $36.4 billion in net income– and this all comes from charging users fees, lending out their deposits, and paying out 0.01% on deposited funds. Instead of paying out returns to their depositors, they pay out to their shareholders– while Celsius does the opposite.
7. Banks are full up on bad debt. While a potential bailout for the banks seems like it may be coming because of bad debt and lack of reserves (due to record stock buybacks and dividends to shareholders), Celsius holds a treasury worth over $300 million in case of a rainy day.
8. Celsius employees will not be dumping tokens at $1.50. Once the price of CEL token has held above $1.50 for 10 days, Celsius will issue 25 million CEL token held in reserve for this milestone (there is another locked 25 million after CEL has been above $3 for 30 days as well). However, if Celsius employees agree to lock up their tokens for a year or more, they get a bonus for doing so. Once Celsius has this data on how many tokens will be released immediately vs over 1–3 years, we will release this to the community. Additionally, a great place to view stats about Celsius is Celsians– a community-driven website that monitors Celsius’ wallets and generates visualizations of this data.
9. Is Celsius safe? Compared to our competitors, Celsius’ business model is both much more profitable and sustainable over time– meaning that while your funds are always safe (Celsius’ top priority is on security), you’re also safe in keeping your funds with Celsius long-term, as we plan on being around for a long time.
10. Special benefits for Top 200. Although Celsius can’t hold special events currently due to COVID, if you’re a member of the Top 200 you’re welcome to participate in one of the AMAs– just send Alex an email!
11. Celsius is officially supporting Flare’s Spark distribution. Announced today, Celsius will be support Flare’s Spark distribution for all those who are holding XRP in their Celsius wallet.

Community Questions

Q: The conventional approach to investing for retirement is 60% equities, 40% bonds– this accomplished you 10% returns per year. With bond rates now so low, what can replace this 40%?

Alex: This is a viewpoint from the old world– the 60/40 model is dead. The model that seems to do better than anything these days is the 80/20 model– Celsius’ model of paying depositors 80% of their revenue. Instead of paying less as AUM increases, Celsius is paying higher rates than ever. For your own assets, the new model is where you are earning in non-correlated assets (gold, BTC, CEL) that will be able to weather a US Dollar that continues to weaken.

Q: Is there a limit to how much I can borrow from Celsius?

Alex: No, there’s no limit, and I think we’ve done the largest loans in the industry– up to $25 million. As long as you have sufficient capital you can borrow from us, as we only do asset-backed lending. We support borrowing against all 33 assets in the Celsius wallet– and you can borrow in fiat, stablecoins, and soon we’ll be adding other assets as well.

Q: What is corporate onboarding and what are the benefits of using a corporate account vs a personal one?

Alex: There are many benefits to having a corporate account– corporations spend billions of dollars lobbying in Washington to create special tax loopholes for themselves. While they’re not announced, any normal person can create their own LLC or offshore entity and receive the same benefits as these giant corporations. This has nothing to do with tax evasion– and these things can be complicated– but any person can take advantage of any of these loopholes. If you’d like to do so, start researching for yourself or contact your local tax professional.

Q: Could you please update us on the plan for the $20 million equity raise?

Alex: I think it’s actually $22 million we ended up with– but that’s the plan. We’re holding $22 million as a rainy-day fund. We don’t need it because we’re a profitable company, but now if something happens and we do need it– we won’t be dipping into your piggy bank, we’ll be dipping into our own. We wanted to have more cash on the balance sheet in case we needed it in an unexpected situation.

Q: Will Celsius’ business model continue to outperform DeFi projects? How could they change to improve?

Alex: I invited a special guest to tell us about this (Alex plays a video where he interviewed with Tim Draper). So what is Tim telling us? He’s telling us that BTC is going higher– but Celsius’ business model would be harmed if Bitcoin’s price dropped to $1,000 and stayed there for a long time– we would need to lay off staff and lower rates.

But the model works very well as long as users are joining Celsius and AUM is increasing (which you can now monitor on a new community-developed website, CelsiusHub)– and this will keep us profitable for the long-term. In the near future, all of this information will be verifiable with Proof of Community, our open-sourced, blockchain-based method for verifying much of Celsius’ internal financial data. You can also see our public financial information on Companies House, as Celsius is a registered company in the UK and files this information every year.

Q: How do you think the new proposed European Union regulations will affect crypto?

Alex: We work with three different law firms, and our work with these firms often contributes to the legal and regulatory discourse around cryptocurrencies. In general, regulation is not a bad thing– it’s only if it’s done poorly that it’s bad– so we’re working towards increased regulation, governance, and transparency while working to avoid the issues banks are having– such as the $2 trillion in suspicious activity we discussed earlier. We file the same suspicious activity reports (SARs), we monitor politically exposed persons (PEP) issues– we are continuously monitoring our users’ activity to ensure that we stay compliant and that the actions of one or a few users doesn’t jeopardize our company or the rest of our users.

Q: Could you make it possible to see our Celsius equity investment via BnkToTheFuture in the Celsius app?

Alex: Yeah, this is a great idea. It will probably take 6–12 months, but it’s a good idea. We’re moving toward the mobile app being native (meaning there will be separate versions for iOS and Android)– so after you see the native versions come out, it will be much easier for us to add these smaller improvements.

Q: What advice would you give to new users coming into crypto who are used to legacy banking systems?

Alex: The problem is mental– it’s not a technical problem! Celsius pays you more than 1000x what the bank does (Alex says 100x here, but realistically most banks are paying 0.01%, not 0.1%– he’s giving them too much credit!). Conventional banks and financial institutions have done such a good job of lowering your rates over the years that no one even thinks twice about making no interest on their money.

Q: Can you elaborate on how the fungibility of Bitcoin protects the community from “bad” coins?

Alex: That is a major problem– I think North Korea alone has stolen something like $3 billion worth of crypto. That’s one of the nice things about Bitcoin, and other coins like it– since they’re not centralized, no one can take away your Bitcoin because it may have previously been used by bad actors.

However, at Celsius we do many things, such as chain analysis, to try and verify that we aren’t taking on dirty money. When institutions want to onboard with us, we look at their wallets to inspect the history of their transactions to see if they’re linked to anything nefarious or risky. For instance, we had someone asking to take a $20 million loan, saying he would deposit $40 million in BTC. After we did our research, we had to say no, because we discovered that his coins were not clean enough– he may not have been a bad guy, but the source of his coins led to a very bad place. Thankfully, we’ve done our due diligence well enough before onboarding users that we’ve never had to later report coins we accepted as being tainted or questionable.

Q: If everyone started earning in CEL, would that affect the flywheel?

Alex: It wouldn’t make much of a difference for us– we already earned the money, so we just have to take the one extra step of using the BTC or the ETH that we earned to buy back more CEL token from the open market– but it definitely would have a positive effect on CEL token price.

Q: Could we possibly delist from HitBTC?

Alex: I know they have crazy withdrawal fees, but we can’t do anything about that– we’ve asked them to treat our customers better– but you should just stop using that exchange. We’ve removed them from our website as one of our supported exchanges– so instead use one of our trusted exchanges listed here like Liquid or Uniswap. Also, you’ll soon be able to do swaps inside the app!

And we’re still trying to get listed on other exchanges– if you want us to be listed somewhere like FTX, start bugging Sam to stop playing with SUSHI and list CEL instead! (Editors note: Several months ago, Celsius originally listed CEL with HitBTC to reach the “3 exchange” quota needed to be displayed properly on CoinMarketCap– although CMC still refuses to list CEL token supply properly, so you should use CoinGecko or CoinPaprika instead.)

Q: How can I buy more than the $2500 limit in the app? It takes about a week to clear.

Alex: We do have an OTC desk– email otc@celsius.network to buy larger amounts and we will help you get the transaction done.

Q: How would you describe the risk profile of putting money in Celsius? What investment class would it have comparable risk to?

Alex: That’s a great question. We’re definitely not as safe as treasury bonds, but we’re not as risky as some of the crazy IPOs you see on NASDAQ recently. Just like Tesla– they had to prove themselves again and again over the years, and now they’re worth more than any of the other car companies in the world. Celsius is trying to do the same thing, but instead of the auto industry we’re taking on the banking industry.

Q: When will fiat withdrawals be coming for the app?

Alex: Fiat withdrawals require additional licenses– we’ve applied for these in the UK, Australia, and a few other jurisdictions– but until we get these licenses, you cannot do it. You’ll need to use an exchange like Coinbase or Gemini still if you want to withdraw your crypto to fiat.

Q: Is it public knowledge how Celsius deploys their assets?

Alex: DeFi is probably around 7%, by far our highest borrower is institutions (>50%) and then after that are the exchanges we lend to– but the lowest amount is definitely in the DeFi farming.

Q: Will 33% or 50% LTV be available as loan options for CEL token in the future?

Alex: We want to add these, but right now CEL token just isn’t liquid enough. We’d like to see more liquidity and volume on a few more exchanges, because we want to see more of a buffer in case someone wanted to do something nefarious with CEL token. Uniswap’s volume is up 10x in the last month, and if it continues it will give us much more comfort to offer the higher LTVs.

Q: Will Celsius ever do uncollateralized loans to retail users?

Alex: The problem with uncollateralized bank loans is that normally they have 6–7% bad debt, but now in the recession I bet the banks will see 15% or even 20% bad debt– and we just can’t afford that. If we told our community that one week we’re not going to pay interest because we need to cover some bad debt, our community would freak out. So we want to do everything we can to protect our community and make sure we consistently pay out the highest sustainable yield we can, week after week.

Q: How is it possible for you to pay 15% on stablecoins while the Fed and the ECB are giving 0% or negative rates?

Alex: We’ve covered this several times– but we pay it because we earn it. We’re generating record yields, and because of this we are making record interest payments.

Q: Can you update us on support for UNI token in the Celsius app?

Alex: Yeah, I love UNI. We got it approved on the finance committee, so now it’s just the technical implementation! So as soon as our tech team is done, it will be live in the wallet.

Q: What do you think about supporting unstoppable domains for crypto payments into the Celsius wallet?

Alex: The service is good– we need to do some digging into the security– but it’s just another DNS. So if someone hacks that, then theoretically they could spoof addresses and steal money– but if we’re satisfied with layering that on top, then this could be a good option. Named addresses are definitely where crypto is going, just like you don’t type in a bunch of numbers, you type in celsius.network to get to our website– but we just need to make sure that is is safe and secure.

Q: I’m a US investor in the equity and would really like to earn in CEL– is this coming for accredited investors?

Alex: Yes, I’ve mentioned this before– we’re working on a plan with BnkToTheFuture where our accredited US investors with them will be able to earn in CEL. It will be locked up for a period, but you will be able to get the same benefits.

Q: When are we all moving to Wyoming?

Alex: Let’s see how this all develops– I know some people got some new licenses, but the community is just starting to be built out there. But who knows, maybe Wyoming will supplant New York City and become the financial center of the United States. It’s early days, and I think you’ll see many other states start to pass the same types of laws and regulations which will make all of our lives easier.

Want to unbank yourself with Celsius (and get a free $20)?

• Install the Celsius wallet (https://celsius.network/get-the-app/)
• Use a referral code during registration (137247d31d)
• Deposit $200 of crypto or stablecoins

You will earn $20 in BTC once you hold your deposit for 30 days

…And click here for a step-by-step guide for onboarding with Celsius.