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AMA: Episode 11 - March 13, 2020
 Mar 13, 2020

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Transcript
all right so make sure everybody can hear me you can hear can chat guys confirm that you can hear me loud and clear all right good to go okay so it's still two minutes to take off but I'm working from home today at the very long night so I got to I got to work from home today on a Friday and I said posted a picture on my on Twitter with a empty subway system New York is really hurting with this coronavirus more infections and so on but we'll get through it like we get through everything right alright so let's get started and so let's talk about what happened in the financial markets then in a crypto market and then what happened to Celsius all right so first the financial markets I think about two months ago we've seen the first earthquake which was the repo markets getting dried out meaning banks would not lend each other the Fed jumped in with five hundred billion dollars and nothing happened no one noticed I talked about it several times in my AMAs in interviews saying a disaster is about to hit us the fact that banks would not lend to each other would not trust each other tells you there's a much bigger problem coming and then in my third or fourth AMA the last one before this one I did the whole hour-long presentation describing how the Fed printed more money in the last 10 years than in the last hundred years and that they're gonna have to do the same thing again they just announced they're gonna feed several trillion dollars several trillion dollars of liquidity into the market what that means is it going to flood the markets with new freshly printed money again that is we used to kick the can down the road now we're kicking the whole planet down the road because it's a coordinated effort between central bank's to take the problem that we have that we have too much corporate debt too much debt overall and just nothing self dealing with the problem kicking them down the road kicking the problem down the road the financial markets the stock market the bond market finally said enough is enough what markets were the lowest they've ever been in history that tells you that everybody's scared shitless and the finally the stock market realized the same thing that somebody is wrong either the bond market is right and the stock market is wrong or the other way around the stock market finally realized that it's wrong and it's down over 30% so when the Stockman goes down a lot of people get liquidations a lot of people get margin calls it's the same people that also trade on other markets like the gold market like the crypto market so what should happen is not happening what should happen is gold prices should go up crypto prices should go up while stocks go down and bond prices are going up so the reason it's not happening is because when people need cash when you get your margin call from your from the CME or from your broker dealer from Goldman Sachs you liquidate everything it doesn't matter if it's gold or if it's Bitcoin or anything else so what we've seen unfortunately the crypto market right before this disaster and there for example the defy community was celebrating that over a billion dollars worth of d-file was locked in smart contract well guess what happens when some of these people start liquidating the price of beef drops it causes more liquidations and it creates a cascade that brings down ether by 50% same thing happened on bit mix right liquidations force liquidations over five hundred million dollars worth of force liquidations have brought the price of Bitcoin down to the lows that we had in the crypto winter right so I think it's December 2018 where Bitcoin hates something like thirty seven hundred dollars which is where it was trading on the futures and last night it touched that line and then it went back up so my point is that lack of liquidity is causing prices to gyrate dramatically and during that process people that issued loans people that are margin people that are scared are liquidating everything they have they don't care what the prices which causes these things to collapse so fortunately Celsius is not a trader we don't trade we don't buy and sell coins we don't decide oh but Quinn's going up or down we just land coins and usually before this disaster in the last few days everybody was coming to us and asking us for stable coins for USD T for dollars no one wanted Bitcoin right so we were fully deployed on the on the dollar side or the stable coin side and we had low deployment on the crypto side and then everything flipped in a second alright all the short seller shows up and said hey I want Bitcoin give me as much Bitcoin as you can and all the dollars guys started giving us dollars back right which was great because we we start charging higher and higher rates earning more money for the community so we did exceptionally well last night again credit goes to the team for putting together an amazing performance most of our employees worked around the clock I worked 24 hours straight it just got a little bit of sleep this morning and we filled every order we delivered on every opportunity we did have many margin calls especially with institutions but we had sea liquidations zero counterparties that did not pay us or did not give a small-market sum so that's an amazing performance that goes to you again the credit goes to a finance department the credit risk management for not some like some other people lending too risky institutions or risky hedge funds we stick with the highest quality we don't do non collateralized loans we always have collateral and when we hold your collateral you don't want to default on those loans on the retail side we have again hundreds and hundreds of loans of spending most of those customers are Hodler and unlike some of our competitors that mostly have traders celsius is mostly Hodler these heartless love their coins they want to own more coins so when they got the margin call most of them put more coins into Celsius and convert the coal or gave us back dollars reduced their loan amount so there would not be in the margin coat now we did have a few liquidation and my recommendations for people if you don't want to look to have liquidation make sure you have coins on deposit with Celsius because again you can earn interest on your USD C or USD t while you're taking a loan against your Bitcoin against your ether so when there's a margin call and we see of other assets we're not going to chase it we're not going to give you a hard time so you you're safe right so it's always good to have additional deposits on top of it so again all these things are connected the repo markets the stock market the bond market the crypto market the gold market and what's happening every day it Celsius right so the good news is that we will be raising rates we earned more so we have to pay more the way we pay more is we raise rate so you will see us bumping the rates of many of the coins that you gave us and again all these great earnings from yesterday we were lending ether at two hundred and forty seven percent annualized we were landing Bitcoin at like 120 percent annualized so these are great earnings that will be delivered back to the community over time we're also increasing the buy back on the sell tokens you'll see more buying already so transfer of additional funds going to additional Bitcoin going to buy cell token so all of this activity remember the flower-girl more users more deposits more interesting come more purchases right we buy Bitcoin with that interest because we have to pay Bitcoin we buy theorem so we were buying the lower the prices when Bitcoin this morning at 2:00 what a ham or whatever it was it was at 4200 we were buying twice as much as we used to buy a thousand why cuz we need to pay interest if we earned it in dollars and we have to deliver those dollars in Bitcoin we have to buy twice as much Bitcoin so we were buying Bitcoin at very low prices which is again goods for Celsius goods for you and these are exactly how the flywheel the Celsius flywheel was intended to work from the beginning so I'm really excited that on the hardest day this is yet today yesterday was the hardest day in finance in the last 100 years there's never been this kind of volume this kind of volatility this kind of price movement both in percentages and absolute points in all of these markets right so performing so well while some of our competitors and some of our you know some of the other players in the space we're thinking about shutting down no closing not shutting down out of going out of business but I mean just freezing the network to keep everybody time putting on the circuit breaker into something that's supposed to be perpetual or blockchain so we didn't have to do any of those things again we did on a skeleton crew alright our trading team is like three or four people our finance team is three or four people so we want to stay efficient because the more efficient we are the more we pay out to the community so we have more assets more earnings more users more depositors this morning than we had yesterday that's the amazing thing there were barely any withdrawal there a few big withdrawals of people just needing liquidity while still in the US DC side and so on but besides that most of our community phenomenally again we we have 20% of reserves in case of withdrawals and none of that happens so I really want to every one of you who's trusting us and who's working with us and and I'm really excited that we've been able to deliver all of this so let's go into the questions we have a lot of questions a lot of stuff in the chat so let's get started the first question is from crypto fan so asking about the recent volatility so look well Attila T is not is inherent in the market right and if you pretend like there's no volatility he writes it for last 11 years the stock market did not have few volatility days a weeks but nothing most of it was really calm and just on one way up and crypto markets are not like that and volatilities inherit because again the crypto community is a much smaller market cap there's much less participants and again you have to remember this price movement as all to do with the speculators nothing to do with the cuddlers like a sinner the Hudler community which is a Celsius community did not move they did not buy they did not sell they just stuck around with their coins knowing that long term they want to own these coins Bitcoin here and so on the 25 points that we have so the people who are buying and selling or moving the prices there was a $700 gap between the spot price and coin base and the future price on bit mix right I mean that's just crazy that is like crazy on on an asset that's trading at six or $7000 ten percent gap in price okay that would never exist on Wall Street right so that just tells it's a very inefficient market and people get scared or they get liquidated they get they dump stuff no matter what the market price is they're willing to let go of ten percent margin and for no reason next question so Ethan ask you about the future crypto in such volatile times again this is when the community is tested this is when the systems are tested this is when the technology is tested and we've seen aetherium and Bitcoin crawl to a halt we could not transfer assets we were trying to transfer a Bitcoin a theory to lend out or add additional liquidity for people who are asking us for it and it would take and sometimes that 30 minutes even though we paid more gas than anybody else I think on one transaction if it's unlike a thousand dollars just to push it into the next block because peat one of our borrowers basically was begging for a thousand bitcoins so so these are the things that just show you that when the system gets really packed it does not function well on the theorem I think 90% of the transaction last night were all yours DT yes DT just clogged down the whole network right so this kind of this kind of performance of this kind of behavior it just tells us that we really need to implement new systems new procedures and maybe think about who we give in priority look it's not just the guy who pays the most in the phone network or the digital networks you always have a signaling channel which is usually reserved for immediate communications we don't have that kind of infrastructure on the blockchain we need to think about how do we do that how do we create the ability for institutions or for nodes to communicate without being clogged through the this overwhelming influx of messages next question so there's a question about withdrawals while they're taking longer and so again we small withdrawals I think are happening and instantly larger withdrawals we wanted to make sure that there was no fraudulent activity especially during times of high cycles and so we took extra precaution to make sure that instead of doing less we're actually doing more because that's exactly when the hacker crooks tried to sneak into the system they wait for a really busy day and then they go scream on the phone and they pretend to be somebody and they hope that the person on the other side is going to basically feel bad and press the button and send the money to the wrong person so to avoid those things we just we made sure that that is handled properly and also hey look we had hundreds of transfers especially on the theory they were just stuck and we can't we're already doing it for free right we're not charging any withdrawal fees and deposit fees or anything so we cannot go and pay the premium rates at worst that ëthere IAM was asking for to put you into the next block so we had to wait basically for that wine to come down the system just kept attempting with lower rates and and then eventually those went through next question yeah so so look the question was about lending and how did the lending volume so for institutions that was our busiest day ever we were at basically a hundred percent deployment so all of the coins that were not reserved for certain activities were deployed out we didn't have anything available if we had probably double as many coins we would have done twice as much business and and again credit goes to the team you know jessica who was working out of europe around the clock Asaf who was working in New York or in New Jersey around the clock and and and other people on the team you know her roomie and others and the team in Israel right the towel and and ELISA and others and these are people that are just again there they're putting aside their personal lives and they're making sure that every one of you every one of our users all of your requests are handled and again the sixty five people in Celsius that support all these people and make sure that the wheels are turning no matter if the theorem block blockchain is blocked or Bitcoin is slow anything else next question yeah so Thomas is asking about counterparty default and how do we handle that and so the first we didn't have any counterparty default but you have to remember that again we hold collateral so so let's say I lent you Bitcoin and your collateral value is decreasing or the Bitcoin price is decreasing and we get nervous and we asking you for more collateral you the counterparty if you don't act we have to take your collateral and convert it into whatever we lent you so if you gave us dollars and we lent you Bitcoin we have to go to market buy Bitcoin with it if we can if we gave you Bitcoin and you borrow dollars we then have to sell your Bitcoin and get dollars so we're always in the market protecting our depositors our job job number one job number two is to always return the assets that were given to us back to our depositors and to do that we make sure that we manage the risk of the counterparties we recently hired a new chief risk officer we added you know a CFO that is very focused on just functioning making sure that all these funds flow and processes and everything else is managed so we divide the responsibilities and again like I said the main issue is selecting who you work with in whom you don't work with and then deciding how much credit you give them or don't give them and for some people we pull back the credit for some people we expanded the credit last night so and again when you fully deploy it it doesn't matter you want to take less risk right if I if everybody wants all my coins or all my dollars then I can be very selective and take less risk and not more risk and that's what we've done last night looking at the next question so the question is do I see the prices of Bitcoin continue to be correlated to the stock market and I've made several interviews about that on the Nasdaq and other places talking about specifically why there is such a high correlation after all bitcoins supposed to be a doomsday insurance policy right so why is it behaving like it's an Apple stock or Google stock so until we outgrow this speculative community until we bring in new members that are here for other reasons they're here to for example benefit from the interest income services or the using it for commercial purposes and not just for speculative purposes until we that community is bigger than the speculator community right we will see this migration correlation to the stock market it's not a good correlation but again the underlying like this is an iceberg and what we're seeing is the movement above the water the iceberg itself looks like a lost connection here but if we back up and so I do see I think look I think I think the price of Bitcoin I said this publicly several times a on the Nasdaq channel and other interviews right on chatter TV and and a bunch of other things you can see I'm sticking with the projection that this year I said we will go down first we will retest lows because there will be for selling because there's going to be liquidations related to coronavirus and the stock market and the fear out there and then we will rebound especially after the happening who will cleanse through a lot of these speculators that are here for their their the tourists are leaving crypto land and going back to fear let are we going to recycle them with users who are coming to earn interest or they're coming for long term investment or they're coming for all the other reasons that we like and because of that supply is going to get cut by half as of end of May you're gonna see again acceleration towards the end of the year and you will see new highs I predict to twenty to thirty thousand dollars but you know this year for Bitcoin again I don't have a magic mirror it's not like I can see the future these are just my prediction it's not an investment advice I'm just sharing with you what I think next question if the five is asking if it will be 15k by the end of year I think would be higher look it has to do with with how many new users commit and when people realize that this what the Fed and then and the government printing trillions of dollars is not something good for us and then we'll realize I need a non-correlated asset and again neither gold or Bitcoin today is behaving the right supposed to gold is down 5% why people are liquidating gold because they need cash for the other stuff you're supposed to do the opposite on the day like today it's supposed to be liquidating your shares and putting more money in gold next question is the team permitted to work remotely yes everyone in on our team especially if they're not feeling good and we instructed them to self quarantine and if they're I'm a sick person the family the priority is to take care of them and we will cover for them right we are hiring a few more people and we already you know issued offers and few people accept it so we're gonna scale what we're doing to make sure we can accommodate everybody but yes everybody who most of our team today for example I think there's only two people in the office today so in the New York office everybody else is working from home next question yes so there's a question about us DC we have a new pair on liquid and we used to have only BT see th now you can actually buy or sell with us DC directly on liquid which is a great opportunity and it saves you a lot of money if you're going for fear from dollars or euros and you want to own some sell token you can now do it pretty quickly we also have a new market maker and as you can see the spreads on and a fin dramatically and and you can see much better performance on switch you know and other Dex's as well as on liquid and as I mentioned before we will be adding one or two new exchanges and in your future which is waiting finalized few things so you'll see tight spread more exchanges and more liquidity and again we'll be buying more in the market with our increased earnings next question how does swings affect market demand and how does market demand affect interest rates so let's go through the flywheel right so any Celsius does exceptionally well when there's volatility when there's no volatility people don't need Bitcoin and they don't need dollars because they're doing just fine with what they need when the volatility increases up or down it doesn't matter doesn't matter the price going way up or the price is going way down they need to hedge they need to buy things or sells things or borrow things and that's where the rates go up right so you see Bitcoin the rate on Bitcoin if you wanted to lend it to somebody it was 2 to 3 percent that's what we were paying we were we went as Lloyd this I think 2.5 percent that's the lowest we've ever been and there was just a few weeks ago ok last night it was only for one night but we were lending Bitcoin at over a hundred percent per year now again it's length day by day so you have to take a hundred percent divided by 365 but the point is that you earn in a few days what you used to earn in a year right so we will be that's why you also see that increase from two and a half to three and a half and maybe even more on Bitcoin again it's a big asset so it doesn't move on a diet but for some other coins that basically I think that the rates on stable coins are going to come down because the whole market shifted from looking for dollars to looking for Bitcoin next question yeah so people are asking about margin calls and how long it takes to communicate again we're a small team the networks were extremely slow we even though we worked around the clock some people got contacted immediately and again we have automated systems that give you the messages that you get notification and you don't have to wait for us we wants to talk to us you can check your own account on our app and you can decide if you want to deposit more assets so when you have a margin call because you took a loan from us you have to decide do I want to keep the coins or don't want to let them go if if the price will continue to go down you can just let them go right and you'll be liquidated that's just how the system works if you want to keep those coins you have to deposit more assets or return some of the loan so we enable you to do it in three or four different ways right now you can even use credit card you can take a credit card and pay with it buy coins with it right inside the app and those coins immediately go and cover your market all right so you can return dollars you can put more coins in you can buy coins through the credit card or you can transfer in money as well all right so so we enable all these different functions again we don't benefit from liquidating anybody so if you ever meet a loan and that's what you need to you need to practice you need to learn how to all these systems work so when there is an emergency or just keep enough coins on deposit right next question so a question about simplex integration again we have I think hundreds if not thousands of transactions and I know the fees are high but that's what the Crypt is a risky industry we're not making any money it's just a service we provide the community three and a half percent is exactly what Visa and MasterCard select charge us and we just basically enable the service for our community we make zero if anything costs us money to enable these services next how the Celsius compared to the centralized platforms the compound so and so you have to understand so defy pure defy the guys that are just a smart contract running on the theorem for example and there's a mismatch there of borrowers and lenders and especially during times of liquidations or lack of demand that gap is just too high so you earning you don't earn enough but when you want to borrow the rate is fourteen or fifteen percent or whatever right and and we've seen that yesterday and we're probably gonna see more of it today where the price of ether is starting to drop there are tremendous amount of self liquidations that is also forcing the price even further down and so on so the system itself is not a liquid system it's not a system that basically like our system goes this way and the defy system is going this way right because effective leads it it moves everything in there up or down like then there's a lot of deposit then they basically tokenize a lot of dye for example but when there's a lotta withdrawals and liquidation they're just driving everything now we we're opening and closing based on the needs of the market and based on the deposits that we have our flywheel runs based on how much we have on deposit everybody in our system earns the same if we have more deposit everybody earns more it's not the dick spread between the borrowers and the lenders increases like empty fund so look I love define I think the technology is amazing we use the same smart contract and multi-sig and and and other technologies that defy uses but you know I'm not sure that the systems that the design of defy passed the test last night right they need to tweak the model they need to see how they deal with all the stuff and and fix it right because otherwise people are just not going to come again and again and use that platform next question all right so I see our CEO Danielle Leone and my co-founder and just we just announced we hired a new chief risk officer this and a security officer so this is a person who makes sure that all of our systems are secure from you know a penetration standpoint from all the different ways that bad actors can commit and hiring these people are things that are definitely very important to help our community live and safer and we also as we mentioned I think before teamed up with fire blocks so we put another layer on top of our existing custodians prime trust Bitcoin others and that basically ensures the hot wallets right and now that all the hot wallets a multi say require multiple signatures to prevent any kind of hacks in or out as well as additional 10 million dollar insurance for the hot water itself I don't think anyone else it currently has hot wallet insurance so we doubled the safety as well as put more protection that will help all of our users as well as counterparty as well as employees to feel safer that no Harker or no bad actor can get into the system next question so yeah have press releases about a lot of this stuff and especially the chief risk officer or chief security officer and you'll see their BIOS and everything else so that's all coming up so I'd see Cheng analysis listed cell tokens if you want to use any of that information as well again lots of information you'll sell seems calm we are also partnering with a major blockchain to add more transparency to everything Celsius does use more Oracle's and provide more transparency on the transactions we'll be making an announcement soon and again trying to add more and more decentralization to the sensitive to the Celsius model you have to remember we have one leg in decentralization right we support 13 different block chains out of the 25 assets we have in the wallet and live like one leg in a centralized world and we have the bridge between the two if you want to bring all these trillions of dollars that are being printed on this side into the crypto community you've got to build bridges and and unless you have one leg here on one leg here you're not gonna have a bridge to bring people over unfortunately D Phi is just addressing the needs of the crypto community right if you're not equipped a person it's very hard for you to jump into D Phi and learn everything you have to be an expert on Bitcoin on aetherium and smart contracts on liquidations and all that stuff that takes a lot of effort right we try to make things really simple the Celsius South looks more like a banking app just like the same app you get from JPMorgan but it pays you eight to ten times more interest and you can always get your funds out and you can also store other assets so these are the things I think that make people comfortable to unboard and come to the Celsius community and again we recommend to them to come with stable coins so it's much easier for people to digest then coming in and buying Bitcoin a theory that's step number two or number three next question yeah so so then I see again over five hundreds of people who came to this session I appreciate it thank you very much I haven't asked from you again all of us it's a tiny little community if you want to be if you want your coins to be worth more you have to bring more people more Hodler to this community so it's on all of you we put all the tools in the app you can invite friends you can refer and earn you can use cell pay to be generous and send money to other people everything is there you just have to click the button again we don't charge any fees or any of this stuff because all of it is designed to help promote the community right and and again I want to thank also get all of our team that works super hard to communicate with all of you to to message you to respond to you and if it will slow or if you're not happy with what happened we want to learn from last night we want to know how to do this better and we definitely want to improve every day and do more for the community and I think that's it let me see if there's any other urgent messages here okay so so again we're better than we were yesterday we have more assets than you were yesterday we have more earnings than yesterday and now we have to just focus on growing the community and scaling from here it's all about us getting to millions of users right now we're to think about 80,000 people who start a kyc download the app stark NYC and joined us but we need millions so we just at the beginning but that was an amazing test we passed the test with flying colors and up to the light from here thanks very much and stay safe stay healthy and you'll hear from us soon




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