Celsius is Luna 3.0? 😬🤯; More crypto layoffs & the golden rule for startups 💼; Stripe’s betting on Southeast Asia as the next frontier for growth 🚀
You're missing out big time... Weekly Recap 🔁
👋 Hey, Linas here! Welcome back to a 🔓 weekly free edition 🔓 of my daily newsletter. Each day I focus on 3 stories that are making a difference in the financial technology space. Coupled with things worth watching & most important money movements, it’s the only newsletter you need for all things when Finance meets Tech.
If you’re not a subscriber, here’s what you missed this week:
Interest rates rose by the most since 1994. Here's what it means for FinTechs 📲
Prominent crypto hedge fund going bust could cause the whole market to collapse 🤯
NFTs: the higher they rise, the harder they fall 🤷♂️
and more!
As for today, here are the 3 FinTech stories that were making a difference this week. It undoubtedly was one of the hottest weeks this year!
Celsius is Luna 3.0? 😬🤯
The (potentially very bad) news 🗞 Celsius, a controversial cryptocurrency lending platform, said on Monday it was pausing all withdrawals, causing more pain in the already fragile crypto market.
The crypto lender has blamed "extreme market conditions" for the drastic move — and claimed this will better ensure that the network can honor its withdrawal obligations over time. Executives also went on to claim that they are determined to act in the best interests of the "entire community" — and insisted customers "will continue to accrue rewards during the pause."
The USP 🥊 Celsius is one of the largest players in the developing crypto lending space, with more than $8B lent out to clients and almost $12B in assets under management as of May. The group, which offers users higher-than-average interest rates on their deposits, is essentially the crypto equivalent of a bank — but without virtually any insurance requirements faced by traditional lenders.
Celsius raised $750M during an oversubscribed funding round last November with a reported valuation of $3.5B at the time (a figure that's guaranteed to have fallen since). The platform claims to have around 1.7M customers.
The impact? This could be Luna 3.0…
✈️ THE TAKEAWAY
Luna 3.0 in the making 👀 As much as $60 billion has been lost after Luna collapsed. Do Kwon created Luna 2.0, and it lost nearly 90% of its value already. Unfortunately, Celsius could be Luna 3.0… Let’s zoom out a bit. Celsius Network promised their investors annual percentage yields as high as 18.63% — with interest paid weekly. These deposits were then lent out to others. It now seems that these returns were simply too good to be true… That said, we can now understand why the pause in withdrawals, swaps, and transfers was such a big deal - it potentially indicates that Celsius doesn’t have (did they ever have them?) sufficient assets to back up deposits and hence might soon become insolvent. If that’s actually the case, 1.7M investors with about $8B in deposits might not get their money back. Ever. Unsurprisingly, this has resulted in more volatility, both for Bitcoin & broader crypto markets, while the company's in-house CEL token dropped 70% within an hour of the announcement. All in all, this is yet another proof that we need more and better consumer protection in the area of crypto finance.
More crypto layoffs & the golden rule for startups 💼
The layoffs. Again 😔 Crypto exchanges Crypto.com & Coinbase and lending platform BlockFi have all decided to cut a sizeable chunk of their staff.
More on this 👉 Crypto exchange Crypto.com and lending platform BlockFi plan to cut a total of more than 400 jobs, joining an expanding list of crypto companies looking to reduce headcount. Crypto.com will cut almost 5% of its workforce or about 260 employees, CEO Kris Marszalek said. BlockFi also said it would trim its headcount as "roughly 20%" of its workforce will go, which would equate to around 170 people.
But Coinbase has won yesterday. Once a tech IPO darling, the crypto exchange announced it will lay off around 18% of its staff, or 1,100 employees as part of a cost-cutting plan.
If that wasn’t enough, JPMorgan cut the rating on Coinbase’s stock to neutral from overweight and slashed its price target to $68 from $171. The extreme decline in cryptocurrency markets in the second quarter of this year combined with Coinbase’s (COIN) ramp-up in investment, means it will be challenging for the exchange to generate a profit in the near term, JPMorgan said.
✈️ THE TAKEAWAY
How you do it matters + the golden rule. First and foremost, it’s clear that layoffs are sometimes inevitable but what matters the most is how you do them. People laid off by Coinbase reportedly got this absurdly terse text after 8AM — “Important update from Coinbase: please check your personal email for further details.” Employees then scrambled to log into their work laptops that were locked. Later their personal email alerted them they were among the 18% who got the ax. That’s not how you do it. More on this in Klarna’s take. Zooming out, I must repeat this again - it’s strange that very few people still don’t realize that hiring too fast is one of the biggest killers of startups that raise money. It killed Stripe-backed Fast recently too. The same now goes for Coinbase, Crypto.com, BlockFi, among others. Because increasing hiring isn’t equal to increased output. It’s often the other way around (more on that - sometime later).
Stripe’s betting on Southeast Asia as the next frontier for growth 🚀
The news 🗞 Payments giant Stripe has introduced its in-store point-of-sale (POS) system, Stripe Terminal, in Singapore.
The USP 🥊 Stripe Terminal unifies businesses’ online and in-person transactions with flexible developer tools and card readers. Clients can customize their checkouts using Terminal’s APIs and software development kit (SDK). Stripe Terminal also offers fleet management so businesses can manage their hardware across multiple locations.
✈️ THE TAKEAWAY
Stripe + SEA = 🚀 At the core, Stripe is using its new business solutions and global expansion to drive more growth. Launching in Singapore can help Stripe take advantage of growing payment digitization and brick-and-mortar retail sales in Singapore. For the perspective, non-e-commerce retail sales in the market are expected to hit $30.06B this year, according to some forecasts. Zooming out, Stripe can also use Singapore as a launchpad for introducing Terminal to other markets in Southeast Asia as other payment providers move into the region. And as demand for unified commerce grows, Stripe will likely expand Terminal into other markets.
🔎 What else I’m watching
Is ETF finally hitting the US?🇺🇸 Investment firms Grayscale and Bitwise said they were optimistic that a spot bitcoin ETF would finally be approved by the SEC soon at CoinDesk’s Consensus 2022 in Austin, Texas. Both Grayscale, which runs the world’s largest bitcoin fund, the Grayscale Bitcoin Trust (GBTC), and Bitwise face impending deadlines for their spot bitcoin ETF applications to the SEC. “There’s a perception in the crypto industry that the SEC is just saying no, and that’s now what the facts show,” said Matt Hougan, Chief Investment Officer for Bitwise.
Crypto pivot 👉 US electronic trading giant Citadel Securities is building a “cryptocurrency trading ecosystem” with the help of high-frequency trading and market-making firm Virtu Financial, as well as venture capital firms Sequoia Capital and Paradigm, according to a source familiar with the plans, CoinDesk reported. Citadel Securities is the sister company to hedge fund giant Citadel that has $38 billion in AUM. The firms in Citadel Securities’ initial consortium will be joined by additional wealth managers, market makers, and other industry leaders that are expected to join the marketplace ahead of launch, the source added. Despite the Crypto Winter, it might actually be the right time to be building… 🥶
Don’t lie to your customers 🤥 Subsidiaries of Charles Schwab have agreed to pay $187M to settle SEC charges that they misled clients about fees for the broker's robo-advisor product. The SEC says that between March 2015 and November 2018, Schwab claimed that the amount of cash in the robo-adviser portfolios was determined through a “disciplined portfolio construction methodology,” and that the robo-adviser would seek “optimal return[s].” However, in reality, Schwab’s own data showed that under most market conditions, the cash in the portfolios would cause clients to make less money even while taking on the same amount of risk. Schwab advertised the robo-adviser as having neither advisory nor hidden fees but didn’t tell clients about this cash drag on their investment.
💸 Following the Money
Razer Fintech, the financial technology arm of gamer-focused brand Razer, has acquired Indonesian B2B2C digital payment facilitator PT E2Pay Global Utama, expanding its offline to online (O2O) digital payment network into Indonesia.
Digital financial services startup Klar raised $90M in a funding round to build out its platform and further innovate to develop tailor-made solutions for consumers in Mexico.
LiquidX, which provides a blockchain-based platform for executing financial transactions, raised new funds from existing investors Broadridge Financial Solutions Inc. and Citi.
👋 That’s it for today! Thank you for reading and have a relaxing weekend! And if you enjoyed this newsletter, invite your friends and colleagues to sign up: