For the cryptocurrency Celsius, which declared bankruptcy last month, all hope looked lost. Investors, however, did not agree, and within a few days, the price of the stock increased by 300%. The scarcity of CEL shares, which is the simple mechanism behind this remarkable rise of the CEL cryptocurrency.
As a result of this phenomena, the action of the declining cryptocurrency appears to be rising to highs that are almost a 100% gain in just one week! Should we invest in this cryptocurrency in spite of this paradox?
How did Celsius (CEL) fare?
The economic environment of the cryptocurrency marketplaces was quite detrimental to Celsius. After a string of awful things happened, he was forced to declare bankruptcy. The collapse of Three Arrows Capital and Terra in a subsequent phase had an effect on it, dealing the CEL project a serious setback.
The business will be unable to cover its enormous $1.2 billion loss after July 13, 2022. According to his application with the US bankruptcy court, he had $5.5 billion in liabilities and $4.3 billion in assets. The reason the Celsius cryptocurrency could not resist such claims is now clear.
Celsius, preserved by the lack of its deeds?Since declaring bankruptcy, Celsius appears to be reviving with significant investments. What, though, does this paradoxical rise actually signify?
What exactly is the lack of action?By shorting a stock, investors are making a bet that the value of the asset will decline, generating profits. The trader who creates shortages does not anticipate future success for the business he invests in. Although it goes against the notion of an investment, this counterintuitive procedure can be quite profitable.
The idea behind it is straightforward: the trader sells a share before including it in his portfolio. He enters into a loan agreement with a broker who will lend him the money he needs to take a position. As a result, the trader never has to pay anything to get this activity. He makes use of broker funds.
He only needs to repurchase this share at the current market price in order to sell it again and close out the position. You understand that if a trader purchases a share while it is in limited supply, he merely needs to have access to the broker’s funds in order to do so. He then closes out the trade by later purchasing it at a reduced price. He then benefits financially from the share’s decline.
Massive stock shortages at CelsiusThis is the exact procedure Celsius (CEL) is going through right now. Its value has soared by approximately 100% in just one week. When you are aware that Celsius has no longer any market future, it is simply exceptional.
Can we, however, suggest that you short or purchase Celsius stocks? On the other hand, because Celsius’s stock is soaring, traders who shorted the company too late are now suffering. Most gamblers could feel inclined to short Celsius at this time. It is likely to see a greater decrease in cryptocurrency if a large number of traders leave the market in a panic caused by the increase in Celsius. But at this time, it is impossible to predict how the market will change over the next few days.