Study Overview
Celsius was not a bank, but the now-bankrupt cryptocurrency network advertised and provided de facto banking services. We investigate the consequences of this collapse for Celsius's depositors. First, we summarize deposits by demographic and institutional affiliation. Then, we examine the intensive and extensive margin differences in digital assets stranded in bankruptcy.
Study Results
We find significant disparities across demographic groups, with institutions, males, and ethnic groups culturally distant from Celsius's founders doing better. Mechanism tests are consistent with more effective monitoring of risk by these groups. Finally, using a difference-in-differences approach, we analyze the influence of stranded assets on user's subsequent digital asset balances and transactions. We find significant differences in behavior, with those most impacted by the bankruptcy moving away from DeFi and NFTs toward more basic transactions (e.g., buy and hold) but also exhibiting tendencies to gamble for resurrection by holding riskier cryptocurrencies (e.g., meme coins). We conclude with a discussion of the implications for policymakers and industry participants, aiming to enhance the stability and resilience of digital asset markets.
Intervention: Cryptocurrency
Research Partner: Emory University
IBSI Funding Acknowledgement: Lab for Inclusive FinTech (LIFT)