Cryptocurrency Price Check: Celsius Network, Tether Under Scrutiny
Cryptocurrency prices were essentially flat on August 22 as the sector grappled with inflation and Russia’s bleak prediction of its invasion of Ukraine.
“Symbolic Threshold”
Bitcoin, the most popular cryptocurrency, fell slightly to $21,237 at last check, according to CoinGecko, while ether, the native currency of the Ethereum platform, was essentially flat at $1,570 and dogecoin was little changed at $0.066857.
Bitcoin had reached the symbolic threshold of $25,000 on August 15, but has since fallen almost 13%.
“Summer rally on extremely low volume in both traditional stocks and digital assets is nothing new,” Martin Hiesboeck, Head of Blockchain and Crypto Research at Uphold.
“No one really expected this to last, least of all those who claim the ability to read the tea leaves on charts,” he continued. “Bitcoin is down about 65% from its all-time high and that a bottom may be close but not quite there.”
Far more important, he said, are Russia’s statements regarding the war with Ukraine.
Bitcoin weakness
Gennady Gatilov, Russia’s permanent representative to the United Nations in Geneva, told the Financial Times that Moscow sees no possibility of a diplomatic solution to end the war in Ukraine and expects a protracted conflict.
“In the US, the Fed has come under renewed attack from key voices that it had not done enough – and still did not do enough – to stop inflation,” Hiesboeck said. “Put these two together and we’ll see continued dollar strength – the Euro is at parity again this morning – and in turn Bitcoin weakness.”
Winston Ma, managing partner of CloudTree Ventures, said that ethereum, the second largest cryptocurrency, has surpassed bitcoin “massively”.
The main reason for that, he said, is the market’s high expectations for “the Merge,” where the platform will undergo a major update as it shifts from proof-of-work to proof-of-stake.
Waiting for “The Merge”
The merger is expected to reduce ethereum’s energy consumption, lower transaction fees (also known as gas fees), and make operations easier and more fluid.
Scroll to Continue
“The shift from POW to POS is expected to make Ethereum more energy-friendly and more sustainable,” said Ma, author of “Blockchain and Web3: Building the Cryptocurrency, Privacy, and Security Foundations of the Metaverse.” “But the key question here is whether this merger will happen as planned? It is scheduled to happen on September 15 after many delays. Is this really the time?”
On the regulatory front, David Lesperance, managing partner of immigration and tax advisor at Lesperance & Associates, said, “stablecoin Tether’s founders are hearing the close footsteps of regulators and have therefore decided to increase the quality of their auditors.”
In July, Tether began working with BDO Italia, an independent subsidiary of BDO LLP, the fifth largest accounting network globally, to issue quarterly certificates of the stablecoin operator’s reserves.
‘Fear of clarity’
“Cayman Islands-based accounting firm MHA Cayman was Tether’s auditor and was widely criticized for not being a Tier 1 audit firm,” Lesperance said. “The entire crypto community, including regulators, is eager for clarity on Tether’s ‘Commercial Paper’ holdings, in the audit that is expected immediately.”
Separately, he said, “the U.S. Trustee’s Office, the U.S. government’s bankruptcy watchdog, is taking the temperature of the collapse of crypto lender Celsius.”
Celsius Network filed for Chapter 11 bankruptcy on July 13, falling victim to the cryptocurrency market crash that wiped out more than $2 trillion in less than nine months.
“In the past, this was a step taken in high-profile restructurings of Enron and Lehman Brothers, both of which found executives responsible for their companies’ demise,” Lesperance said. “The U.S. Trustee’s Office said there are ‘many questions’ about Celsius’ operations and its financial health, as well as how management allowed it to go bankrupt.”
“Loosely Regulated”
In an Aug. 18 filing, the U.S. trustee said “the cryptocurrency market is relatively new, purposefully opaque, and loosely regulated at best.”
“There is no real understanding among customers, interested parties and the public as to the type or actual value of crypto held by the debtors or where it is held,” the filing said.
Lesperance said the broad crypto market crash was exacerbated by the implosion of the TerraUSD stablecoin and its backing cryptocurrency Luna.
“Celsius users have been warned that they are unlikely to get much of their money back,” he said. “While it is likely that retail customers will see some return, it could take up to 18 months and recoveries could be “between 50 to 60 cents on the dollar”.
