The Financial Times published a new report that sheds more light on Celsius Network’s demise. Alex Mashinsky founded the company. The sector’s downturn has forced the company to cease all operations and negatively affect their clients. It filed for bankruptcy.
The report claims that Mashinsky took over the company’s trading strategy back in January 2022. The price of Bitcoin hovered between $35,000 and $40,000 at that point, while the market for crypto was in a downtrend. Support was beginning to appear at those levels.
Over a month the crypto market traded sideways, with Bitcoin dropping to $30,000. Aware of the company’s financial situation, and looking to make up for its losses, according to the report, Mashinsky was ready to make a significant bet on the price of Bitcoin.
In January the U.S. Federal Reserve (Fed), was scheduled to make an announcement about its shift in monetary policies to lower inflation. This financial institution suggested a rate increase regime that would result in a reduction of their balance sheet.
Mashinsky bet that the cryptocurrency market would trend lower after these announcements. Therefore, he sold “hundreds of millions of dollars’ worth of bitcoin” expecting to buy it back at a discount, but the market moved in the opposite direction.
According to Financial Times, Celsius had to sell their crypto assets at a loss after BTC and other currencies rallied. However, although the sector saw substantial losses eventually, Mashinsky’s team was wrongly able to make incorrect assumptions about when the crypto crash occurred, according to the Financial Times.
The trader was to sell the entire book, ignoring any bad information. He was carrying large amounts of bitcoin.
Celsius Loses Billions in Crypto by Trading These Products
Mashinksy’s involvement in his trading department caused conflict among the staff, the Financial Times said. The company’s former Chief Investment Officer (CIO) Frank van Etten questioned Mashinsky’s trade and his participation in making investments decision.
Mashinsky clashes were the reason that the CEO left the company on February 20, 2022. According to the Financial Times, Celsius sold their Bitcoins and then bought it back at a loss in a period of just two days.
They could have profited from crypto market crash if the company had waited. But, according to another source, Celsius traded on speculations.
The thought was rational. There was a lot of speculation (…).
The report stated that Celsius had already suffered losses since 2021. Celsius had over 11,000,000 shares, or $400 million, in the Grayscale Bitcoin Trust.
The investment product was trading at a premium compared to BTC’s spot price. The trend reversed, and the GBTC started trading at a discounted rate from Bitcoin.
Mashinsky received a proposal to reduce their losses, but he declined it. He expected the GBTC would reclaim his premium. The company’s losses were exacerbated by this decision and amount to over $100 million.
Bitcoin prices (BTC) are currently trading at $23,800 as of the writing of this article, showing sideways movements in the past week.
