Over five years of fly-in, fly-out mining work in Far North Queensland, Joel had saved up almost enough for a first-home deposit.

Then, about six months ago, the price of bitcoin began a long decline.

Now he's lost most of his savings — and this week his luck got even worse.

The company that manages his cryptocurrency in exchange for rewards has frozen withdrawals for all its customers, meaning Joel can't even access his money.

"Before the prices dropped, it was starting to look like a house," the 24-year-old electrician said.

Joel is one of many Australians whose financial fate will be decided over the next few days, after the price of bitcoin plunged about 30 per cent in the past week, shaking confidence and raising fears of further declines.

On popular Australian cryptocurrency Facebook groups, moderators have posted links to counselling hotlines.

"There's a lot of very distressed people," said Luke Torsello, moderator of Crypto Australia Facebook group, with 99,000 members.

"Everyone is in damage control at the moment."

What's causing the fall?

Inflation, said Chris Berg, co-director of RMIT's Blockchain Innovation Hub.

Central banks around the world increasing interest rates to combat inflation has led to investors pulling out of what are called "risk assets", or assets with a high degree of private volatility.

"Crypto is the ultimate risk asset, so it's the first to fall," Dr Berg said.

This has come as a surprise to some. Cryptocurrencies had been promoted in some quarters as a "hedge against inflation", meaning they would hold or increase in value as inflation went up.

It hasn't worked out that way.

"Bitcoin is not an inflation hedge," Dr Berg said.

The combined market value of all cryptocurrencies is now reportedly less than $US1 trillion ($1.43 trillion), or about a third of its November value.

So that's about $US2 trillion ($2.86 billion) wiped off cryptocurrency in just over half a year.

As the price falls, investors are getting jittery.

Last month, Terra, which had been one of the world's most valuable and stable digital currencies, crashed in value, losing 95 per cent of its value in 48 hours and triggering a widespread loss of confidence.

A month later, this has created trouble for Joel's crypto-lender, Celsius.

Why is Celsius in trouble?

About six months ago, Joel deposited the crypto he had accumulated over the past five years in a crypto savings account operated by the US-based company Celsius, founded in 2017.

Celsius was set up to be a bit like a bank, but promised much higher interest rates of up to 18 per cent per year.

It said it was able to pay such high rates through making long-term loans and earning even larger returns.

This may have sounded too good to be true, but plenty of people jumped at the opportunity. As of May this year, Celsius had 1.7 million users and close to $US12 billion $17.17 billion) in assets under management.

The business model worked fine while the market was strong.

But when Terra crashed spectacularly last month, rumours spread that Celsius would face a liquidity crisis, meaning it would not have the cash for customers to make their withdrawals.

An old-fashioned bank run ensued: Customers rushed to withdraw their money.

At the time, Celsius chief executive officer Alex Mashinsky dismissed the collapse of confidence as "FUD", or fear, uncertainty and doubt.

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But the very next day, on Monday in Australia, Celsius abruptly announced it was "pausing all withdrawals".

Joel was caught unawares.

"It's most of my net worth," he said.

Theo, a 32-year-old from Sydney working in logistics and freight-forwarding, has most of his savings locked up in Celsius.

"It kind of feels like my money is being held hostage," he said.

He was also saving up for a first-home deposit, as well as an engagement ring.

What happens now?

It's not clear what will happen to Celsius, what the company's plan is to remedy the situation, or whether customers will get their money back.

The company's CEO, Alex Mashinsky, broke a three-day silence on Thursday.

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What happens next partly depends on several unknowns, including where Celsius has invested its customer's money, and how much money it had previously set aside to be available for customer withdrawals.

We don't know these things because, though it's like a bank, Celsius isn't regulated as a bank, which is required to have a certain amount of capitalisation (ie. money set aside for customer withdrawals).

"We don't know the position of Celsius," Dr Berg said.

"We don't know if it's gone bust and it may well not have — there's all sorts of rumours going around."

Now the regulators are closing in. State security boards in four US states have reportedly launched probes into Celsius.

Pushed to crypto by inflation and unaffordable housing

On page like Crypto Australia, a common refrain to the Celsius news has been "Not your keys, not your coins", meaning those who have apparently lost money shouldn't have stored their coins with a centralised exchange or company that can get hacked, or otherwise go under.

In 2014, hackers stole more than $US660 million ($945 million) of users' funds from the world's largest exchange, Mt Gox.

"I'm from the Mt Gox days so I've learned my lesson, 'Not your keys, not your crypto,'" said Crypto Australia's Luke Torsello. 

Newer members were learning it for the first time, Mr Torsello said.

One in nine Australians have bought cryptocurrencies in the past year, according to Consumer advocacy group Choice.

For years, bitcoin and other currencies have boomed, fuelling an investment culture of wild speculation.

Stories of young investors going "all in" and making it rich have inspired a generation who are struggling with the high cost of living, unaffordable housing, and stagnant wage growth.

Now, dreams of crypto riches appear to be crashing down.

Joel invested in crypto because he felt he couldn't get ahead otherwise.

"I don't want to hold my wealth in cash."

Karl, a young Australian with most of his savings totaling thousands of dollars locked up in Celsius, said the same.

"It seems like a never-ending battle when you look at the cost of living, wage stagnation, cost of food, cost of fuel, and inflation.

"I don't want cash sitting in a bank account because with inflation, you're earning 0.5 per cent interest. You just can't win."

Time to regulate?

Celsius's troubles will strengthen calls for regulation, Dr Berg said.

"The movement for consumer protection, especially with centralised companies like exchanges, will no doubt become more salient as a result," he said.

The Australian Prudential Regulation Authority (APRA) recently laid out a policy roadmap for regulating financial entities engaging in activity with crypto-assets and aims to implement this by 2025.

Meanwhile, the crypto crash could get a lot worse.

Previous downturns in 2013 and 2017 saw the price fall more than 80 per cent from then-record highs.

So far, bitcoin is down about 70 per cent from its November 2021 high.

Either way, Dr Berg said the fall won't shake the foundations of crypto like previous downturns, when the technology was less widely used.

"In the long-term, crypto as a technology, blockchain as a technology, as an infrastructure for financial assets — that's locked in now.

"It's a normal part of the economy."