The GameStop incident had an impact on the marketplace. Celsius filed for bankruptcy last month, and since then, the asset’s value has increased by 300%. The resurgence of short position hunters can be used to explain the dilemma.
The Celsius case is back!
It is crucial to recontextualize all the components before being able to comprehend what is happening right now about the CEL token. Withdrawals on Celsius’ platform have been suspended as a result of the current crypto environment, which has been significantly impacted by events like the collapse of the Terra ecosystem and the bankruptcy of Three Arrows Capital (which was connected to Terra). Markets are spooked by the news, and the asset value falls. The company Celsius declared bankruptcy on July 14 and entered the American bankruptcy system.
The price of the CEL for the previous three months is displayed in the graph below, which is accessed through Coinmarketcap. It is possible to see the two bearish peaks that coincide with the suspension of withdrawals and the declaration of bankruptcy.
As at the time of writing, the token is trading at $1.86, up 17% over the previous 24 hours as the session’s market moves downward. The token even crossed the $2 mark earlier in the morning.
The fact that the token’s current price is higher than it was prior to the disclosure of CEL’s financial troubles and the news of the suspension of withdrawals is also interesting to observe. On June 12, after this statement, the asset dropped to about $0.15. Celsius filed for bankruptcy on July 13 in the US, and since then, the asset has seen increases of around 300%.
Toward a major short-term liquidation!
Therefore, it would appear that there is some sort of dilemma with regard to this asset. We’ll attempt to explain this paradox to you. The temptation to short an asset is strong when it is struggling. The infamous GameStop incident also began in this manner.
The group was in deep financial trouble and had been substantially shorted by strong investment funds. That, however, did not account for the fact that tens of thousands of tiny shareholders decided to start buying the asset in large quantities in order to scare off Wall Street financiers, sharply driving up the price. likewise making short sellers take losses.
One of the explanations for this search for shorts on Twitter is the hashtag #CELShortSqueeze. The market’s limited supply of CEL tokens must also be added to this. In fact, a significant portion of the CEL tokens are still blocked on the platform as a result of the transfer freeze. The FTX platform, where 4.4 million CEL coins are kept, is one of the busiest places to store CEL tokens. That exceeds the total of all the previous exchanges.
How’s this quick squeeze going?
Right now, the Celsius community is trying to squeeze short sellers. The approach is straightforward: they purchase tokens on FTX, remove the virtual currency from the stock exchange to a wallet, and then place a sell order at occasionally astronomical prices. The market is ripe for this short squeeze, says Samir Kerbage, chief product and technology officer of asset manager Hashdex:
- As the circulating supply is very low, it is technically possible to create a short squeeze, although the impact on the overall market could be very limited and difficult to sustain over a longer period.
This tactic enabled CEL to eliminate more than 300,000 short positions yesterday. On the FTX platform only. According to the Coinglass platform, $480,000 worth of short positions were liquidated during yesterday’s session. It may be challenging to discuss the GameStop effect, but it is evident that “too visible” shorts can occasionally appear especially slick.
