Understanding the Recent Crypto Crash: Ethereum, Staked Ethereum, and Celsius

hello everyone uh welcome to episode 43. so today's topic is mainly about the crypto crash but uh predominantly there

are a couple of things that i wanted to talk about one was the uh the fact that ethereum another token called the staked

ethereum st ethereum which was getting de-pegged and there was a there was an fud article there a lot of

fpd articles fear and certain indian doubt articles being written about the fact that ethereum is getting dependent

comparing it to the lunar usd death spiral that happened and also the fact that the celsius exchange is almost

collapsing right now and stopped withdrawal so we'll be talking about these two and then how it has led

or contributed to the crypto crash and then the overall effects of inflation versus crypto crash so

um obviously with starting with the disclaimer i am not a financial advisor on investment expert anything that i say

in my video is for learning purposes only whatever i have learned whatever i have understood i try to provide clarity

and i try to provide to explain it in a more easy to understand language in my in my videos

and you make your own decisions based on your own research and there's an important disclaimer that i do is that

never ever send your money to people who call themselves as professional brokers or investment advisors pretty much

everybody who calls themselves as a professional broker or an investment advisor

they are all frauds they are all scammers they will target you by email they will target you by comments

thousands and thousands of people have lost their money sending their money to these so-called investment advisor

professional brokers there are no investment schemes where you can send your money to somebody else who you

don't know and you can get a return of investment from it so your money you invested which is what we have been

teaching or have been teaching in this channel quite regularly so i don't have a telegram group or any

closed groups but i am publicly active on twitter at the regenerator london not only me if you are in crypto if you're

in fintech in general you will get latest information probably up-to-date information very very quickly in twitter

and you can follow a lot of people in twitter um you know you can see the people that i follow on twitter and you

can follow anyone so anything that i say in twitter is open and public and can be corrected by the

others so a couple of days back i posted a thread on twitter explaining what the

issue is and what is going on in detail so you can also read that that thread i will give you the link in the

description and also all the articles that i'm going to be talking about i'll give you the link in the description so

in episode 41 if you had not understood what happened actually in luna because a

lot of articles were written but nothing was really very very clear in terms of what exactly happened so i had broken it

down into a layman's language in terms of what exactly happened with the luna and the ust fall

why did luna fall and why did ust get depict i had explained it with examples and if you have not watched it if you

watch it then you'll get a better understanding of what happened in luna and also the risks

that are being faced with regards to the ethereum scenario and how the comparisons are being made or why the

comparisons are being made so essentially just to summarize usd was an algorithmic stable coin which was

created by terra group and they had no backing of real world assets like ustc or usdt for example and it was pretty

much backed by the demand for luna and which caused a concept called death spiral so when the ust which was

supposed to be pegged to one dollar did not uh retain its peg and lost its peg that kind of caused the death spiral so

there is a comparison that is being made to a token called staked ethereum st ethereum that is traded against ethereum

at a one is to one ratio so the the pegging dynamics is being compared here where staked ethereum is supposed to be

trading at one is to one with ethereum but it's not trading at once to one right now and that is the reason behind

the fud attacks or the the articles that are being written by a lot of people

where the death spiral is being compared to ethereum and we will break it down in terms of the comparison between those

two and explain what exactly is this take the theorem to ethereum begging or the the the why is it being compared in

the first place so a lot of social media influencers um who have never understood the lunar collapse had even written

stories about the lunar clubs even when the luna was collapsing these are people who had written saying that the great

opportunity to buy luna and even at that point of time i had advised i mean i had to even put an uh note saying that do

not buy luna because it's not a death spiral so um these are the kind of people who are now comparing it to uh

the the lunar collapse because they never understood what happened in luna and they don't understand what is

happening right now so again let's just compare

the the blockchain the way in which the blockchains work for example there are two primary ways

in which blockchains works or provide security to the blockchain one is proof of work and another is proof of

stake so in proof of work essentially we've talked about this in our channel before essentially a complex

computational problem is solved by a powerful computer and this the first node first computer that

solves it gets a blockchain reward and that's how the uh the the blockchain nodes are being written or the data is

being returned to the nodes and these computers are all acting as nodes and they are all acting to trying to solve

the uh computational problem first and uh the this is basically called as a hash rate and for example bitcoin is one

of the famous proof of work uh mining uh proof of work based uh blockchains in the world and ethereum

was also a proof of work based blockchain in fact it is still partially a proof of work based blockchain so

proof of stake is where the validator nodes are all expected to have a minimum number of staked tokens and native

tokens for example if it's ethereum you need to have ethereum if it is chronos you need to have cro for example so if

you have a minimum number of tokens then these know these computers are allowed to act as validated nodes and they can

write to the blockchain and they act as the validation mechanism and this proof of stake

means that in order for you to have 51 percent control of the network it becomes more and more complex than a

proof of work blockchain and that's where the security becomes better and better and obviously the electricity

consumption the power consumption for a proof of stake is much much lower as there is no powerful computer there is

no powerful computing that is required to solve any mathematical equations in a proof of stick

so in terms of the proof of stake technically you can own the tokens you

can stake the tokens into the validator notes and you will get a small portion of rewards indirectly and you can

participate in the mining indirectly as well whereas in a concept like bitcoin mining for example you need to have a

computer or you need to have a hardware to be able to participate in the mining process but in a proof of stake if you

have the tokens if you have the native tokens you can also participate in the the whole blockchain proof of stake and

you can get a small reward out of keeping the ah of the process of keeping the blockchain secured so in episode 23

for example we had done a demo of when kronos was being created we had done a demo of how you can stake your cro to

the chronos validator nodes crypto.org data nodes in fact and you can earn up to 12

return of investment on the validator nodes by allocating your token by delegating your tokens to other

validated nodes you don't even need a computer or anything basically you are using your chronos using your cro on the

blockchain and you are delegating it to other validator nodes and you getting a return of investment that is what's

taking you know proof of stake would entitle you to basically you're getting a reward out of the everybody can get a

reward any token holder can get reward unlike the bitcoin mining where you need a computer so

in fact in the last few years most of the new blockchains that are being created like the bnb chain chronos

for example they are all going into the proof of stake method instead of the proof of work and

ethereum also decided in 2020 to migrate from proof of work to proof of stake in fact vitalik button had written a great

article in number 2020 about why proof of stake explaining the differences between proof of work and proof of stake

i'll provide you the link to this article it's a great article to understand the the the details behind

proof of stake versus proof of work and also some of the comparisons in terms of the cost and the electricity consumption

everything else so as such the uh in december 2020 ethereum's taking went live so

ethereum's taking is already live and you can if you go to the ethereum is taking web page you can currently see

that their apr is about 4.2 percentage and about 13.47 million ethereum is already staked on the ethereum chain and

the staking is already live the proof of stake is already like part of it is already live in the ethereum state we

will talk about why it is only part of it in a minute but essentially there are there are about four options that

ethereum gives you in terms of how you can stake your token so the first option is obviously solo homestaking which

means that you have a computer you need to have a little bit of technical knowledge and you need to install the uh

the staking code in your computer and it needs to be connected 24 7 to the internet and you need to commit a

minimum of 32 ethereum to begin the staking process these computers are then called as a

nodes the second option is taking as a service when somebody else has already done the first part and they have a node

for example you can delegate your ethereum to those node owners for a small fees and this is very similar to

what we did in episode 23 where we put our cro on the chronos network on other validator nodes the only differences in

when we did in chronos even if you had like you know 20 chronos or 30 known you could have done that it's 20 or 30 cro

you could have done that but in terms of staking as a service where you can delegate your ethereum to the other

validator nodes you still need a minimum of 32 ethereum so in

as an alternative they give another option called pools taking which is commonly referred to as liquid staking

in ethereum or in in most blockchains what it allows you to do is it allows multiple people to pool together and

they can contribute any small amount of ethereum and then they uh these tokens are collected by third

party uh utilities and these third-party utilities then would go and do a staking as a service by putting a tokens into a

staking pool uh collecting once they have corrected 32 ethereum for example minimum 32 ethereum for example so it's

basically a pooled uh staking option where a group of people have come together it's like a crowdfunding

and the fourth option is obviously centralized exchanges where if you put your token um you know if you keep your

token in a centralized exchange with or without your knowledge they can go and do a staking into the ethereum network

and get a 4.2 percent interest out of the process in terms of the rewards that they can get but again there is a lot of

risk in this process and there is it's it's a bit less reliable so we'll also talk

about this in the towards the later stage when we talk about celsius for example so

um staking on the validator notes you can probably compare it to uh like a fixed deposit in a bank so you're

putting it in a bank and there is a currently in most networks there is a 28-day unbonding period where

if you want to take your money out you need to wait for a minimum of 28 days before you can unstake it so

in homestaking or staking as a service you have directly staked it and it's your

own ethereum and you can withdraw it whenever you want obviously today the withdrawals are not allowed we will talk

about it so um the beacon chain that the the beacon

chain is the name that was given to the the chain in ethereum which allowed this taking in december 2020 but currently

ethereum is a bit unique right now where the old chain the ethereum 1.0 as it is called and the beacon chain is running

in parallel and the beacon chain is going to merge with the main chain probably in another two or three months

it was supposed to be about 18 months after the origin of beacon chain but it has not yet happened so which means

that you can only stake it into the beacon chain right now you cannot unstake it from the beacon chain at the

moment for all the ethereum that is take down to the ethereum staking now

what it means is that if you translate it roughly the bank has said that you can deposit into your fixed deposit you

will get an interest out of it but you cannot withdraw your uh your ethereum or you cannot withdraw your deposit or you

cannot take out your interest from the uh bank that's what they have said but because people have a lot of trust in

this bank they have deposited their money without even knowing when the withdrawals are going

to be allowed they know for sure at some point of time withdrawals will be allowed similarly the the eta for the

merge for ethereum is another three or four month or maybe three months and in october 2022 let's say for example only

then withdrawals can be started but people have been staking for almost more than a year knowing very well that they

cannot withdraw it in the shorter time period so as of today you saw in the ethereum main page about 13.47 million

ethereum is staked in the ethereum beacon chain so roughly two thirds of this is staked using option one or two

where you know home staking was taking as a service where people had a minimum of 32 ethereum and they have directly

staked into it so they can unstake it when the withdrawal process begins one third of the ethereum is staked

using some sort of pools taking so you know we talked about the third option which is pools taking or liquid staking

so out of the 13.47 million nearly about you know four and a half million roughly is being staked using some sort of a

pool staking option so 13.47 million ethereum which is roughly translates you know before this

crypto crash happened ethereum was trading around two thousand dollars which means about 27 billion dollars of

ethereum worth of ethereum has been staked into the ethereum beacon chain and today the value is around thousand

three hundred dollars roughly which is what seventeen point five billion dollars which is still a huge amount of

ethereum that has been staked into it now for the liquid staking there are a lot of providers um in fact um

there are about six or seven providers which no one talked about because there is a provider called as lead of

finance which has kind of become synonymous to the liquid staking as a third party provider because they

control pretty much 99 of the liquid staking market so as you can see if you go to leader finance website you can see

that about 4.29 million 4.2 million of ethereum pools taking ethereum is being staked in leader finance so

like we said about one third of the entire staking is controlled by the pooled sticking market out of which

nearly 99 percent is controlled i would say or probably more than 95 percent is controlled by leaders taking so leaders

taking has kind of become synonymous to the liquid staking concept even though there are other providers so we'll only

talk about leader speaking for today in this video so out of this

4.3 million you can see that the the ethereum natives taking apr was about 4.2 percent but on the latest

taking website you would have noticed it's about four percent and that difference where they are they are

giving you a slightly lesser apr is how they are able to uh get their revenue mechanism and sustain the margin

by providing you a more sustainable apr which is less than what ethereum native staking is providing so they will

get the 4.2 percent take a 10 percent cut and they will then give you a four percent basically that's how the the

model works and that's a very sustainable model in terms of what leader finance have come up with

obviously when staking with this is actually a an excerpt from the leader finance page so users when you stake

your ethereum how do you know that you staked ethereum what do you get in return what is the identification right

so basically you get a token called as staked ethereum st ethereum which is given on a 1 is to 1 basis so if you put

10 ethereum you will get 10 staked ethereum tokens and these staked ethereum balances

you can see it in real time and you can then use it to do lending and you can use it like

ethereum um that is the advantage of having um this token st ethereum in the first

place so that is why it is called as liquid staking where in ethereum's taking

normal ethereum if you stake it then you lose control of your token right you don't have it till you are able to

withdraw it till that point you can't do anything with it here the the representation token that they are

giving you staked ethereum to say that you have staked ethereum you can actually go sell it to somebody or you

can go and trade it you can do collateralization you can do everything uh denoting the fact that you have

ethereum in it we will use a real world example you will probably better understand it at that point

also there are no lockups or there are no minimum deposit from a leader perspective right um

you can even put like point one ah ethereum and you will get 0.1 staked ethereum token for example so

you can also see for example if you staked it every day you can see how much apr rewards you are getting for

participating in the ethereum you can see your apr percentage you can see your rewards now how does that work so again

i'm borrowing the the diagram from leaders website so as i said ethereum 1.0 is running and beacon chain is

running in parallel to the ethereum 1.0 so you will take your ethereum and you will

get your staked ethereum token on the ethereum 1.0 chain so when leader is giving you the staked ethereum token

they are giving it to you in the ethereum 1.08 then lido will then take all of the ethereum

that has been collected and they will then put it into the beacon chain and they will stake it in the validator

nodes on the beacon chain so that is how they are maintaining the relationship right now so when the merge happens this

will obviously be in the same chain and again the reverse of it is that every day

or every few hours the beacon chain data is then collected by the oracles which then tells the ethereum 1.0 chain inside

lido staking contract saying that how much apr percentage or how much tokens have we gained by the stock by this

taking because that is not still available for withdrawal yet but the data is available to be collected using

an oracle that is then collected and that is how in the leader finance website if you go you can see how much

taking rewards you are going to get for these ethereum that you have staked into leader finance and again you know they

are showing you how they are taking 10 percent as a reward and that's how they are maintaining or that's how they are

running the operations basically so for example if you go and deposit one ethereum in the uh leader finance and

you get one staked ethereum you should roughly get 1.04 ethereum after one year at a four percent apr so this will

translate to point zero zero zero one ethereum per day or zero one nine point zero nine per day and what will happen

is on day one you will deposit you will get one state ethereum as your balance and day

two you will see that your state ethereum is now going up to one point zero zero zero one state ethereum day

three it will be like one point zero zero two and then at the 10th day for example you will get 1.001 state

ethereum for example so that is how you will see the real time reflection of it obviously there is a there is a little

bit of slashing that could happen but i have taken a really simple example to give you

an understanding of how this process works now there is one risk obviously with

leader finance which they have state that state at very clearly that staking during the first stages of ethereum 2.0

means that your ethereum will be frozen and you cannot unstake it you cannot withdraw it till the ethereum ah merging

happens till that point of time you can however sell your staked ethereum on another exchange if you want to this is

very clearly mentioned and one of the biggest attractions of liquid staking is obviously like i said

that you can trade your liquid staking token to another uh token or as a as the token

that it represents so for example this is not new to ethereum this is this is there in many other uh platforms in fact

even in chronos recently argos protocol had launched where you can stake your cro uh instead of sticking it natively

into the the chronos chain or the crypto.org chain you can stake it into orgo protocol

where you will earn the same 12 percent interest but they will give you a token called bcro as a representation of the

token that you have staked into the argo protocol and what you can do is you can go sell your bcro if you don't want

it if you if you really need it if you really need liquidity or money you can go and sell your bcro without

waiting for the 28 day unbonding to happen and that is where the liquid staking

concept comes into benefit in fact for people who want to do it

so the same way the convenience is that the staked ethereum tokens can be traded and

also used as a collateral very similar to how you can use ethereum and so technically what it means is that it

represents one ethereum so in essence one staked ethereum is pegged to one ethereum so

unlike the ust where it is where it needs to be back to one dollar here it's just a token representation it's just a

convenience factor that in a trading in a secondary market that if you are going to trade one stick

ethereum whether or not you are going to get one ethereum is based on convenience and

it's based on the market condition it is not based on a pigging algorithm or is it

not based on a pegging condition that it always needs to have one ethereum behind it if you go

and unstake it in lead of finance you will definitely get one ethereum back when the beacon chain merging has

happened but till that point the trading um exchange ratio where one staked ethereum needs to be

one ethereum is just convenience and we can see that better we can understand that better if we talk about

an example a real world example for for for example so let's take gold as an example right so

if you uh put if you deposit gold into a bank in a one year deposit for example and let's say they give you a token a

gold token as a representation it's not a it's not real gold but they give you a token to say that this token represents

one gram of code so if the one gram of gold's value is thousand rupees this token you can go and sell it to people

saying that i have this this gold in the bank this token the presents it can you take this and give me thousand rupees

and people might give you thousand rupees because people trust the bank people know that they can go and redeem

the token for the real gold after a year and that means that they know that this token actually represents gold which is

in a safe locker in a bank so this gold token pretty much has the same value as the gold itself at this

point but if you want to if you go to a pawn broker and if you're saying that okay

you know here's a token give me thousand rupees what the palm broker is going to do is that he knows that you need money

he knows that you are desperate for money you know that he knows that you want liquidity and he knows that you

have to wait for one year to actually get the real gold so he will make use of the opportunity and your position and he

will say that i can give you only 990 rupees or maybe even 900 rupees for all you know right this is an arbitrary

scenario the palm broker is going to benefit from the fact that he knows that you are

in need of liquidity and even though he knows that he can get the gold which is 1000 rupees because you need needed two

months earlier three months earlier four months earlier this happens with chit funds where you know that the money is

going to mature in about four or five months but you will you can you can have the option of you know breaking the the

maturity and say that you know i'll take a five percent penalty and i will take only uh you know 95 percent of the money

so this happens in funds and in so many recurrent deposits some some of the banks allow you to do it

so the same thing palm broker can also do and say that okay i'll give you only 900 rupees or 950 rupees for example so

this is exactly what is happening today where the staked ethereum when you are going and selling it to ethereum it can

either be lower or higher to the ethereum's value depending upon the availability of liquidity and what the

people are willing to buy the staked ethereum from you till the point the beacon chain and the

withdrawals are not active when the withdrawal and the beacon chain are active

if you are getting less than one ethereum from a secondary market you always know that you can go and withdraw

it and you can get one ethereum directly from the withdrawal itself so till that point of time

this is basically a secondary market that is controlled by availability and supply and that is what is happening

which is where the huge difference between luna and ust to ethereum and staked ethereum is coming into picture

so there is always a possibility that staked ethereum will not trade at one

ethereum in fact from the beginning uh the liquidity was created only for this arbitrage scenario

or in fact the liquidity was created for convenience so you can trade when you could technically trade one state

ethereum for more than uh one ethereum for example one point zero one point zero two and it has happened in the past

because they know that this is a state ethereum which is an yield bearing token or an inter generating token people have

bought it for more than the value of one ethereum at some point of time and today obviously it is less than the

value of one ethereum so you could buy it for you know more or less depending upon the market conditions and it is not

um comparable to the depending that happened where usd was supposed to be pegged to one dollar it was not a

convenience it was supposed to be an algorithmic begging to one dollar that's where the huge difference coming into

picture so the uh the fact is that right now today uh one staked ethereum you know when i was making this video one

state ethereum was trading for about 0.93 which is technically like a seven percent discount on ethereum that you're

going to for sure get when you redeem it at the point when beacon chain is going to become active now

um obviously the desperation means that a lot of people want

liquidity and they are in need of urgent liquidity so they are selling it and they are selling it for a discount

knowing it and people who are buying it are buying it knowing that they are buying it for a discount so this is

nothing new in fact in the you know this is not something that is happening today a lot of people claim as if this is

happening only right now after the luna is depending and comparing it but it's not new at all in fact if you actually

check the lifetime comparison between the price of the staked ethereum to ethereum it has never maintained its

ones to one liquidity last year almost the entire last year it was going up and down in fact for a long period of time

it was below peck to ethereum uh one state ethereum was getting about 0.92 ethereum even during like you know last

year mid of last year like may to 2021 for example a lot of time it has gone below point nine five point nine six

point nine seven and all that so it has hardly maintained the peg the only reason we are talking about it is in the

last six months it has been maintaining a peg where you know people have been looking forward to this beacon chain

becoming live and people were saying that okay it's going to happen soon the the liquidity was getting better and

better so you could have gone and got one ethereum out of one state ethereum so that is what is happening but

obviously because of the market crash the crypto crash the inflation we'll talk about it in a minute which means

that people need the the liquidity people need money and they are more desperate and that desperation is being

used which is where the deep picking is happening this has nothing to do with the lunar usd comparison which a lot of

social media influences have been calling out incorrectly and quoting and and in fact

this is creating fud on the minds of investors fear uncertainty and doubt and you know sometimes i even wonder if this

is being done intentionally because these people have written brilliant articles before and it is hard to fathom

the fact that they are writing a comparison between ethereum state ethereum to lunar usd uh incident so

this is an fud that i wanted to explain i had explained it in my twitter thread but i also wanted to explain it in a

video so is there a risk for example there is a definitely a risk you know there are

there are some people who have rightly explained i will give you the links for those people as well they have rightly

explained the risk but behind why exactly is it worrying the fact that state ethereum and ethereum is not

maintaining its exchange rate that is definitely valid now what's the the worry or what's the issue in that

scenario is the liquidation scenario so um there are a lot of people who've done a circular collateralization this is

almost like uh you know um this is almost like uh you know leverage trading i would say for example so there are a

lot of places where you can borrow ethereum against your state ethereum like you know away and the curve finance

how does it work so imagine if you know we start with the concept we start with the position where one state ethereum is

equal to one ethereum so you have ten ethereum to begin with you go to lead leader finance you stake it you get 10

state ethereum tokens now you go to rv for example and you then put 10

staked ethereum token as a collateral and you will get a 80 it is 81 percent and for convenience on

maintaining it at eighty percent you can get eight aetherium as um as a loan from away away so you can then this is your

position one for example so you now have eight ethereum now we can go and then ah stake this ethereum in lead of finance

get eight staked ethereum again you can collateralize it in a way and you can

get six point four eighty percent of it and you can do the same thing again you can get five point one to it so you can

keep doing this till you can get a healthy position out of it now imagine if the market is going to go up

you can obviously sell your ethereum and you can you can keep doing it and you can go back to your

the top uh pool and top position and you will probably have made a you know one or two ethereum ah profit out of it if

the market keeps going up for example now imagine if the one staked ethereum is only zero point nine ethereum if it

has come down like this happening today right to zero point nine three let's take a point where the zero its come

down to zero point ninety three that means you have to maintain this collateral ratio so if you are

maintaining only eighty percent ratio then you need to buy and supply more staked ethereum as collateral to

maintain the eighty percent ratio this is almost like a derivative trading if you don't do this if you don't maintain

your 80 ratio your assets will get liquidated now let's look at it with example with the value right so what

happens is this is the example that we talked about so 80 percent

is what we are talking about if say staked ethereum is not 1 and is 0.9

that means that the stake tethering that is needed for maintaining position 1 is 11.11 for position 2 is 8.89 0.11 that

means you need an additional of 2.7 ethereum to maintain the 80 percent collateral

ratio at that 0.9 basically so you need about 3500 dollars in today's value to maintain all these three positions from

liquidity from getting liquidated otherwise you are going to lose your entire value of tokens you are going to

lose all the ethereum that you have supplied all the stake to them that you supplied you are going to get liquidated

here that is why it is such a risky strategy and also you do not get the opportunity there is no warning or

anything that's going to happen if it goes below the 80 percent if it goes below the the liquidation collateral

even one percent it will get liquidated so you are not going to get an early warning or anything like that as soon as

the exchange state fluctuates as soon as the oracle detects that the collateral ratio is no longer 80 percent it is

going to liquidate your your position which means technically the collateral that you need to maintain

is going to be much much higher so you need to keep adding collateral after collateral so that you are not getting

liquidated and if the market falls so drastically like it has fallen in the last few days then you are

at much more risk of getting liquidity that is what is happening a lot of these people who had taken up such positions

they were literally gambling uh i mean obviously leverage trading is completely gambling um they had been completely

liquidated i would say a lot of people have been liquidated ave had even posted a note on their website or our

explanation about there is a there is an interesting graph as well as to how much percentage of um how much percentage of

depending will cost how much percentage of liquidation so they are estimating a fifteen percent depend uh 0.85 if it

goes to one stick to thin goes to one 0.85 ethereum they're expecting about 250 million dollars liquidation if more

collateral is not added to the collateral positions or the liquidation positions right now so i will give you a

link to it you can go and read it in detail as well so now come see the celsius angle to the story so

i mentioned in episode 41 where um why i keep talking about only a handful of crypto tokens handful of blockchains

decentralized exchanges and also centralized exchanges and i provide links to those decentralized exchanges

or centralized exchanges in my videos saying that these are the ones that i trust these are the only ones that i

will keep my funds in and the reason i do this is because which is where i mentioned that i never use luna or i

never use usd as a stable coin and the reason why i do it is because you know when you are keeping your money in

centralized section exchanges they are basically custodial wallets which means the centralized exchanges can actually

fully control our crypto and they can play with our crypto so it is very important to know where to keep your

money so it's like you know if a bank is going to take your money and they're going to play with it then you really

don't want to keep your money in that kind of bank right so which is why i have not mentioned a lot of crypto

exchanges for example celsius and nexo um you know uh coin switch cooper the i have never mentioned any of these kind

of exchange centralized sections just because you know it's not something that i would recommend to anyone or it's not

something that i would personally use in fact forget about recommending so i have only talked about those centralizations

which i personally use in in all of the 40 42 videos that i've made so

one thing that central exchanges do is that they they provide you very very attractive rates which is what celsius

did they provided such an attractive rate that was extremely attractive but is also extremely dangerous and risky in

my opinion which is one of the reasons why i've been avoiding celches knowing very well they cannot afford to give you

this kind of an exchange rate unless and until they have taken an extreme risk with it so

very few centralized exchanges have got a transparency in terms of showing you what is the real balance that they are

maintaining in their cold walls and hot wallets for example bit true um offers you a near time or real time view of

what is their collateral in terms of you know uh hot wallet and cold wallet in term to maintain the

customer funds if a customer is deposing under bitcoins they're providing a collateral equivalent of how much they

are maintaining which means that if everybody wants to withdraw they are always showing you like a like a glass

box and how much money they are holding in that bank basically so

and they do this by operating in a much more safer way so for example uh they do offer d5 interest rate you know 60

percent for example they were offering it on cake but the reason they were able to offer it is because pancake spam was

offering 80 so they can take the customer funds and put it in the pancakes app get 80

percent and they can offer 60 to the customers and keep the 20 revenue which is sustainable for them and is also

easier for the customer knowing very well it's being staked in a more safer environment in d5 directly

and if they know how to connect to a metamask if you watched my video if you learnt it how to connect to d5 how to do

it directly you if you take that extra effort you can obviously get the direct 80 but if you don't want to for those

customers who do not want to put in the traditional effort they get the 60 so which means that they are maintaining a

safer option in terms of staking and providing you with a benefit but how are celsius and some of the other websites

they were offering interest rates that were more and more dangerously higher than what you could

earn directly in d5 years old so how they were able to offer these kind of exchanges obviously

the reason why they did it was to attract customers so potentially they know they could have leveraged those

assets is what the allegation is and for the last uh you know 10 days or so you know there were a lot of tweets that

were going on saying that there is a liquidity crisis that is booming in celsius network and

a lot of depositors who have loaned their coins not even deposited their coins people were using the term that

they have loaned their coins to celchers because keeping it in celsius which is a centralized exchange that is using your

tokens and earning money for themselves and then providing a small portion of it was termed as a loan it's like a mutual

fund where you're putting money into a fund and they are playing with it by buying whatever they want so for example

if a mutual fund has taken your money and bought lsc tokens lac ipo for example they are going to be at a loss

right now it's about 40 percent down right now um again it's not a right example because you know it's

it's supposed to have been a safer option but here you know they have taken the money and they have probably done a

uh a collateralization or a circular collateralization with that which is what has been the allegation for the the

last few days comparing it with this strict ethereum ethereum scenario and what celsius could have done

again a lot of it is speculation but um a lot of on-chain analysis based on what historically celsius has been holding

suggests that celsius has lost about 120 million in couple of dao hacks and they have also lost a lot of money

potentially in the lunar usd death spiral which they have not clarified in terms of what their full impact has been

or they have not clarified what their impact has been they have just maintained a defensive stance in terms

of the lunar usd that's parallel and also potentially the onshore analysis also

shows that 73 percent of their ethereum results are logged up in collateralized um either locked up or

collateralized into ethereum's taking on the become chain which is not redeemable yet so

the percentage breakup of the 73 percent is not known like how much percentages with uh with leader or how much positive

is directly staked on to the uh you know homestaking option for example so again this

if the customer had agreed that it is going to be locked up for an indefinite period or three or four months or

whatever it is then it's another story but if the customer never understood the fact that he was locking up his token or

if it was going to be used by celsius to be locked up in the beacon chain or in lido or whatever it is then that is

where the trouble comes in because uh it has never been clear how the celsius um apr has been interested has been

generated so the fact that celsius actually calls themselves not as a crypto platform they call themselves as

a wealth management company so that itself is a an alarm to to start with a couple of days back uh there was a there

was a twitter change that was going and saying that you know um there was a ama that was supposed to

happen and the ceo of uh celsius alex mashinky suddenly uh there was an announcement saying that he lost his

voice and he's not able to attend it so where people were expecting him to come out and talk about it saying that

you know everything is fine there's no this is all fud and they were expecting him to

come out and talk openly about it this felt eerily closer to the the usd luna scenario for example but after denying

the liquidity issues even on 12th of june for example afternoon he denied the

the allegations he denied the liquidity issues he says that there is nobody in celsius who's having a problem with

drawing from cell show me one person who's having a problem uh withdrawing from celsius hours later a few hours

later after he had even come out and said that celsius made a public announcement saying that they are

passing all the withdrawals all the swaps all the transfers meaning all your assets are completely frozen celsius

obviously this could be temporary but you know it's just categorically different to

what alex was saying a few years few hours back before this announcement came and that is where all the allegations

that were being made people start to understand it better and better in terms of the liquidity issues that celsius is

facing now one of the terms and conditions that liquid that celsius has somebody had posted it i'm borrowing

that here is that if you had used your uh your your tokens

for the earnings service meaning you put it to say that i need to earn interest on on it

then it is not going to be recoverable or you will not have a legal right to have a recovery of it in case celsius

becomes bankrupt or enters into liquidation this is completely different to many other custodial ballots where

they say that if you are keeping your your assets under our custody in terms of you know bitter or

other exchange for example then they have an obligation to give your um your digital tokens back

is what most of the terms and conditions would sleep celsius has got a terms and conditions that they are under no

obligation to pro under applicable loss to provide you um in case they they become bankrupt

to return back your money this is like a bank saying that you give us your money if you become bankrupt we will not give

you back your money so that is kind of what uh celsius is saying now

obviously these stories are very very relevant in terms of why the crypto market is crashing because

panic is setting in fud is setting and people are expecting that ethereum will fall similar to the luna

without having any understanding between the the difference between the two

technical aspects of of begging and why it needs to be pegged or why

it was pegged in the first place and again this is also started exposing the vulnerabilities of celsius and the

liquidity issues of celsius now the reason why it is more and more important is because apparently uh as per

estimation this week you know obviously the crypto value keeps going up and down celsius holds nearly 12 billion dollars

of crypto assets and 1.7 million customers have their funds in the celsius exchange so they're all now

completely logged out of their cryptos they can't sell they can't use it they can't do anything with it they can't

trade with it even if they had like you know usdc or usd is completely locked up and there are similar centralized

exchanges like trade five block five nexo there are so many ones in fact nexus uh is interesting because nexo is

offered to buy some of the assets of uh celsius in case they they go into liquidity issues um they've made a

public offer for example but in my opinion they're all offered operating under similar tones and i wouldn't keep

my money in any of those centralized sections for example and in a bad economy everything that has

happened in luna and ust people are in a panic mindset and this is con having a

continuing domino effect in terms of the crypto downfall so again

this is also related to inflation the whole crypto crash is also related to inflation but this is all kind of you

know interconnected because inflation is rising at an alarmingly high rate in many countries and

compared to the earning potential that is where the key difference is inflation is nothing new in india for example the

commodity prices and many of the commodity prices have increased by you know five or six times in the last 10

years in india for example you know rise and essential lentils and everything has has gone up by almost three or four

times in the last 10 years so this is not new to a country like india for example

so but we have to compare it with the earning potential the salaries of people in india about you know 10 15 years back

as compared to today has also gone up significantly or you know comparatively it is it is not i would not say that it

is it was going hand in hand but it has gone up you know comparatively if you compare it to countries like uk for

example the average salary increase per year is less than one percent people who have been getting maybe 2000 pounds per

month uh 10 years back they will be getting about 2050 pounds you know they're hardly been 50 pounds

monthly increase in terms of the salary in the last 10 years that is where the the inflation and what the the impending

decision is having an impact in terms of the commodity prices for example in the last you know you know 10 years 12 years

for example you could buy 2 liters of of milk for 1 pounds in many places you can go and buy for one pounds um even when

it was going up to like one point one one point two pounds you know people were obviously selling it as 242 pounds

you could still say that argue that it you can buy it for one pound and the price of petrol was now the the price of

milk is about 1.5 pounds it's gone up to 1.61.7 in in many places so about 50 percentage has gone up where the the the

salaries have gone up by literally one or two percent in total and the price of petrol was about 1.1 pound in uh in

twenty twenty of a hundred and ten rupees let's say it's touching nearly one point nine points 190 rupees in

about two years it has gone up almost 80 percent and what it has all meant is that the

disposable income people are having uh or are used to have has now shrunk and leaving them with no money for

investments let alone investments it doesn't have they don't have enough money for

making their ends meet for example the monthly electricity and gas bills are now almost three times higher you know

people where they were spending like 100 pounds per month on gas and electricity now are spending like 300 pounds per

month and if you're getting only 2000 pounds per month in terms of rent

then your disposable income was only about 100 200 pounds after all your bills and rent and food and everything

put together now your if you're just your gas and electricity bill itself has gone up by more than 200 pounds per

month that itself is eating up into your disposable income now you don't even have enough money to pay for your food

or pay for your you know other aspects of life which means that to support their real world life and to support

their needs in real world to support their finances people are liquidating their positions they are selling their

shares they are selling their crypto they're selling all their investments in order for them to sustain this point

where the economy is in such a bad position so which means that people if they have invested their essential funds

that they're getting out at a loss because they have to get out they don't have money to survive in the market even

people who have invested money uh thinking that you know they don't need it right now because of the shortfall in

terms of the earning potential to these are the expenses they are now having to exit their positions which is being

utilized by the market again it's a supply and demand scenario when people know that people are desperate they are

they are you know ready to sell it come again and again people who are buying it or buying it at a lower and lower prices

so you know the rich are getting richer and the poor are getting poorer as a scenario that is kind of happening even

now where it was kind of different in crypto a few months or a few um years back let's say

so all of this kind of started with the ukraine war with the lunar usd crash and it's kind of you know it's like a

negative news that is getting snowballed and it is having a direct impact on the retail users

confidence so when a new retail user who even has money is trying to come in he is looking at what is happening to

others around the market who are exiting with negative positions this is all the reason that is contributing to it's not

necessarily a reflection of the crypto market or what has happened in crypto itself it's basically the the impact of

the real world is being felt in the invested investment world as well so i've said it in my previous episode

and i'll kind of reiterate you know crypto obviously is a very very volatile investment so if you if you started in

2022 or if you started in late 2021 then probably one of the worst entry points in terms of when to start in crypto

because you're practically seeing the complete uh downfall of crypto because of all the other factors that have been

happening so at the moment there is not much that we can do as an investor and there is no

way to confirm what the bottom is and i do not believe in all these charts which say you know compared to 2020 compared

to 2018 2015 you know it's not in my opinion again it's a personal opinion there is no way to confirm

because these are all effigy attacks these wars and everything that is not it's not predictable if this had not

happened then we wouldn't have seen this is kind of a butterfly effect that we are seeing

it is not a prediction of a mathematical or statistical model that we are seeing right now

so again the positives catch on the negatives are also catching on it's like snowballing with each other so

personally all that i can say is that i'm practicing patients if you had followed me from 2020 i had talked about

right from my first videos i talked about holding a position of xrp at a loss for nearly three years and even

when i was making my initial videos i was telling that i'm not going to sell it i'm going to maintain it at a paper

loss i will sell it only when i am able to make a profit at a point where it was at a loss for me and i was holding it

for three years that is how openly i was explaining about my position in xrp and it did happen where xrp went up so high

at a point where i was able to selected a good profit after waiting for three years nearly more than 200 300 in terms

of profit and if you had watched my initial videos you will know this because i've been talking about it

during the time september 2020 onwards i've been talking about this position so

what you can do is you can take time if you have invested in crypto invest your time now and learn a lot about the

crypto market learn a lot about the concepts that i was talking about in this video for example i'll provide you

all the links all the twitter links and it's a great source of information and knowledge is the key to survival here

knowledge is the key to everything um so you know before you invest your money make sure that you're investing enough

time into it and understand what you're doing again hope you found this useful until next time thank you bye