According to FSInsight, a combination of economic pressures and over-leveraged yield schemes has led to a tremendous selloff of the cryptocurrency over the past few days. This has wiped out more than $200 billion in revenue from the digital asset market.
Sean Farrell, Head of Digital Asset Strategy, said that “the decline of TeraUSD (UST) and Celsius is a long-term favorable trend for the market,”
Furthermore, the note noted that in the traditional banking business, such open displays of illiterate capital destruction are often neglected. Thankfully, crypto markets have the advantage of “repeating and evolving at a rapid pace”.
Heavy borrowing with volatile staking method
“In terms of Celsius, if revenue-generating strategies sound very impressive, they usually are,” FSInsight said. The crypto lender was also “notable for pursuing ‘risk-free’ returns on customer assets.” The move called for massive borrowing, along with methods for making dangerous and volatile bets.
The crypto lender was also notable for “pushing a ‘risk-free’ return on client assets,” which combined with risky and volatile mortgage methods called for large levels of borrowing.
“In a stressful situation, leverage becomes a deadly double-edged weapon that can strike when you least expect it,” the note continued.
FSInsight is optimistic on crypto pricing in the later part of the year, and believes that now is the moment for medium to long-term traders to consider increasing their allocation to Bitcoin (BTC).
