1-866-HODL-NOW — that’s the support line for Celsius. Except you likely won’t get an answer. Celsius — the major crypto platform which froze customer withdrawals over a month ago — has filed for Chapter 11 bankruptcy.

What happens to customers’ deposits, and how does this impact the broader crypto market?

Peak Celsius vs. Bankrupt Celsius

Near its peak, Celsius had over $20B in customer deposits and 1.7M customers before crypto began to crash. Now it’s got billions of dollars in debt that it likely can’t pay, investigations from six state regulators and a lawsuit from a former asset manager.

It all started with collapsing crypto prices.

• Bitcoin is down 68% from its peaks, and crypto trading volume is at its lowest in 18 months. Margins were called, and companies started blowing up…
• Voyager Digital filed for bankruptcy last week. Hedge fund Three Arrows Capital is being liquidated — but their founders aren’t cooperating, and their whereabouts are unknown.

Since the freeze, Celsius paid over $900M in debt owed on decentralized finance platforms — becoming an issue of who should be paid back first?

Will customers get their funds back?

That depends.

• Celsius owes money to various parties: Lenders, suppliers and customers.
• Depending on how customers are categorized, they could be paid back different sums in different orders.

TBD in courts — if Celsius even has enough money to cover its debts. Per the U.S. state of Vermont’s Department of Financial Regulation, they most likely don’t — stating Celsius “is deeply insolvent” (unable to pay debts owed).

According to Georgetown Law Professor Adam Levitin (CNBC): Celsius likely doesn’t have enough to cover its debt, and customers could wait years for repayment — if they receive anything at all.

Investors: HODLing faith

Some will never touch crypto again. While others haven’t lost faith in the crypto’s potential, despite losing money. Instead, they felt lied to and have lost trust in centralized exchanges — opting to hold their crypto on personal crypto wallets, which has its pros and cons:

• Pros: You actually own your crypto — and no bankruptcy can take that away from you.
• Cons: If you lose your wallet’s private key, password or recovery phase, you can lose your crypto forever.

On the fence about crypto? Just keep an open mind. Remember the year 2000?