The coronavirus crisis has affected just about every area of our lives: our jobs, our families, our religious practices, our abilities to travel locally and internationally–almost nothing has gone untouched. As such, the world seems to have been driven into a time of serious priority reorganization: as the systems that we rely on to survive falter, the things that are the most important to us become clear.
At the same time, the things in our lives that are not working for our benefit have also become crystal-clear. Perhaps this is the reason that peoples’ financial lives are also going through a serious period of reorganization–especially for those of us with income that has been compromised because of the coronavirus.
This reorganization has become apparent on several levels: for example, Greg Petro, CEO of retail analytics company First Insight, told CNBC’s Lauren Thomas that “millennials’ [financial] behavior is changing more dramatically than any other generation,” and that they are “going to cut their spending.” Additionally, Business Insider reported that the same group is “more likely than boomers to contribute more money to stock-related investments, and more likely to move money out of their stocks.”
The coronavirus also seems to have brought more interest to cryptocurrency. Alex Mashinsky, chief executive and founder of crypto earning and lending company Celsius, told Finance Magnates that since the beginning of March, “twice as many people have downloaded the [Celsius] app,” which provides users with interest-bearing cryptocurrency accounts as well as lending services.
Finance Magnates recently sat down with Alex Mashinsky to talk about Celsius’ mission to bring the next 100 million people into crypto, how the coronavirus is changing the financial world forever, and how women are essential to cryptocurrency’s financial revolution.
What is Celsius?
Mashinsky explained that in spite of the fact that Celsius is often referred to as a crypto lending company, “90 percent of our users come to [Celsius] just to earn interest,” Alex said. “Only ten percent need a loan.”
“I know everybody calls us a lending company, but mostly, we’re an income company–we’re an interest income company: we do the hard work of lending out the coins and earning an income, but from a user perspective, all the user gets is income deposits in their wallet.”
“We’re not trying to help people with stocks or bonds or the things that you can get from hundreds of brokers, banks, or anyone else,” he explained. “We try to focus on non-correlated assets: our wallet has three ‘buckets’ in it, and basically, it allows you to deposit fiat and earn high interest; it allows you to buy gold and earn yield on gold,” which Mashinsky says, “never existed before.”
And of course, “it allows you to deposit cryptocurrencies and earn yield on those as well,” he continued. “All of those are things that you cannot get from the traditional finance world.”
So, what’s the catch? “We’re not a bank–we don’t have FDIC insurance or anything like that,” Mashinsky said. However, “we rely on having very robust security to make sure that none of our depositors will be affected [in case of a security breach],” Mashinsky said. “We use companies like Fireblocks, and PrimeTrust, and others, who are the technology providers.”
“Fireblocks, for example, has a $20 million insurance policy on their hot wallet–it’s one of the very few companies that has hot wallet insurance. Most other companies will tell you that they have insurance on their cold storage–but when you’re lending coins out the coins are never in cold storage, so the insurance is meaningless.”
“Celsius partnered with Fireblocks to provide hot wallet insurance, so while coins are transiting–either being deposited or being lent out–they are protected as well.”
“The coronavirus is the pin that popped the bubble.”
“The coronavirus is the pin that popped the bubble–the debt bubble,” Mashinsky explained. So, we have hundreds of trillions of dollars worth of debt denominated all over the world: mostly corporate debt and government debt that will effectively never be repaid.”
“So, the problem we have is that the entire world economy paused to deal with coronavirus, and the value of all of our equities and everything else was compressed, but the value of the debt stayed the same,” he went on.
Therefore, “the problem that the entire world is struggling with is not just the health effects of coronavirus, but also the fact that right before corona, we were running as fast as we could, and we barely paid the debt. And now, even when we come back to ‘normal’, normal is [going to be] 50-60 percent of what 100 percent used to be.”
In other words, “our restaurants are going to be half-full. Our airlines are going to be half-full.”
And so, “[…] everything is going to have to adjust: working from home, how much [money] you make, how much people charge you for rent–all those things are going to have to adjust, because the world is never going to be the same.”
Is the coronavirus crisis causing a shift away from banks and other traditional financial institutions?
Therefore, because the world is undergoing such a rapid shift at the moment on so many levels, Mashinsky seems to believe that now is the time for people to reclaim their financial well-being–to make a movement away from banks that profit off of their clients’ holdings without sharing the earnings, and towards companies like his own, which offer financial incentives for long-term deposits. So far, this seems to be working.
“What Celsius is saying that this whole idea that your money should be making money, instead of you working for a living, has completely disappeared from the planet: it started in Japan, where they had zero rates; it went to Europe, where they had negative rates, and now the United States has zero rates.”
“So, basically, people expect nothing from their money–people give their money to the bank expecting zero earnings. Celsius is saying, ‘look, it’s going to be much harder for you to make a living–you better save. You better make sure that your money earns for you, because that should be supplementing your income.”
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“Frankly, the banks and other financial institutions earn so much for themselves because they give nothing to the depositors. Celsius is trying to reverse that: Celsius is basically saying, ‘we’re going to give 80 percent of what we make back to the depositors.’”
“[…] Our job is to generate yield,” he said. “We kee 20 percent of the yield we generate, and we keep 80 percent of the deposit on it. Now, people look at us and say, ‘oh my god, this sounds crazy–why would you do that?’”
“The secret is that for rich people like me, if I give my money to a hedge fund, or if my give my money to Ray Dalio (the world’s best money manager), the deal between me and Ray Dalio is that I get to keep 80 percent and Ray gets to keep 20 percent. That’s all that Celsius is doing…even if you have $10, you will have the same benefit as someone who has $10 million.”
Celsius is “effectively the opposite” of a traditional bank
Mashinsky explained that in this way, he sees Celsius as “effectively the opposite” of a traditional financial institution.
“Now, we are in this mission to basically build up the crypto community and earn trust for the community–decentralization and the blockchain are the right way to deliver these services.”
However, if banks and other traditional financial institutions are earning so much money, then why would Celsius–and other companies that offer interest-bearing crypto accounts–bother with offering such high incentives for their users?
After all, Celsius’ website clams that depositors can earn up to 10% interest on stable coins and other cryptocurrencies; BlockFi, another crypto company that offers interest-bearing accounts, promises users up to 8.6% per year. Crypto.com offers up to 8% per year.
Mashinsky said that the inspiration to create Celsius came in part because of his personal interest in creating products and technologies that can benefit their users with little to no cost to them. Perhaps most notably, Mashinsky is one of the inventors of Voice Over IP (VOIP) technology, which powers Zoom, Skype, and other web-based audio and video call services.
Once VOIP technology became operational, “hundreds of millions of people joined and switched away from the phone company to use this free service.”
“Every person on the planet needs more income.”
“So, when I saw Bitcoin and the crypto revolution, I said, ‘gosh, this is the same thing–instead of using your bank and earning nothing, and being tied to the dollar, here is an opportunity to create wealth for yourself–and there should be huge adoption. Hundreds of millions of people should be using this.’”
And so, Mashinsky entered the cryptocurrency space in 2013. However, by 2017, “I was like, ‘nothing is happening–we basically have the same number of people. You got to all these events and you know everybody; that is not a good sign. That means we were just a tiny little community.”
Therefore, the primary inspiration to create Celsius came from the desire to bring “the next hundred million people” into the cryptosphere: “most people are not speculators, so just coming to them and saying, ‘hey! Buy Bitcoin and it’s gonna go up! Sit on it! Hodl!’–that’s a hard sell for most people.”
“But when you come and you say ‘here, you can use the rails of the blockchain–you can use these things to earn yield, to earn an income’, you can bring a hundred million people [into the space]. Every person on the planet needs more income, needs that interest income.”
Mashinsky hopes that over time, this is the way that the world will come to see and interact with Bitcoin. Currently, Bitcoin’s public image may not be attractive to most people.
“Today, Bitcoin is almost like a ‘doomsday insurance policy’, and that applies to maybe one percent of the population,” he said. “So, how about we add another product that applies to 100 percent of the population?”
“Without it, we’re not going to bring the next billion people into this revolution.”
Women are vital to the future of cryptocurrency
And who is Celsius targeting as the next billion people to bring into the cryptosphere?
“Women,” Mashinsky said.
Why is this? “The crypto community is 93 or 94 percent men,” he explained. “If you’re gonna have a revolution,” you need everyone involved, he explained. “Imagine having Voice Over IP (VOIP) and only having men talk to men–it sounds ridiculous, but that is what we have in crypto.”
“It’s shocking,” he continued. “I didn’t believe it myself–when we launched the app in 2018, we started getting all of these statistics from Apple and Android, and they would come: 94-95 percent men [were downloading the app].”
“It’s because [Bitcoin] started as this cyberpunk, hacker, gamer type of environment–and we never graduated from that.”
However “70 percent of the money in the world is spent by women, not by men; so, how are you going to scale this and not include women?”
“So, we committed from the beginning that at least half of our team will be women, and Celsius is one of the very few companies in crypto that has more women than men [in senior positions].”
“ It’s because if you want to bring women in, you have to think like a woman–you can’t think like a man and say ‘I know exactly what women want,’” Mashinsky said. “If anything, men have proven that they can never figure out what women want.”
“So, that is probably still the biggest challenge…convincing new people, or bringing in women and winning their trust, is still a work in progress.”