The price of CEL, the native token of Celsius Network, a crypto lending platform, has almost quadrupled since June 19 in what appears to be a frenzy stirred up by futures and derivatives traders. CEL’s price rose from $0.28 on June 14 to $1.56 on June 21, a 457% spike compared to the crypto market’s 12.37% rise in the same period.
Notably, the rally began after PlanC, a popular independent market analyst, announced a $20 million bounty for anyone who could prove that the Celsius Network suffered a coordinated attack at the hands of a third party, which prompted the crypto lending firm to suspend withdrawals last week.
Recall that last week, Celsius announced early Monday it would pause withdrawals, citing “extreme market conditions.” The company also announced it would pause its swap and transfer products, according to a blog post. It did not provide a timeline for resuming withdrawals.
What you should know
The announcement by PlanC led to a frenzy on Twitter, with many accounts placing the hashtag #CelShortSqueeze in their bio and thus reflecting their intentions to target investors who bet that CEL’s price would fall.
The hashtag was trending higher in the United States on Twitter. Meanwhile, internet queries for the keyword, “CEL short squeeze” also reached a perfect score of 100 between June 12 and J 18, according to data tracked by Google Trends.
The “trending” hashtag and keyword hint that day traders bought CEL tokens en masse, thus pushing its price upward.
Thus, investors who were short (those who borrowed and sold the token in anticipation of buying it back at a lower price), instead had to purchase it back at a higher price to “cover” their bearish positions.
As a result, the so-called “short squeeze” proved successful, resulting in a massive CEL rally.
The event served as a reminder of the popular GameStock stock frenzy in January 2021, wherein an army of Redditors profited by damaging the short positions of Melvin Capital and other hedge funds, causing billions of dollars of losses.
Celsius Network, which held over $20 billion worth of digital assets under management last year, now risks becoming an insolvent organization. The reason is its inability to pay excessively high yields to clients (as much as 18%) on their crypto deposits.
In May, Celsius had only $12 billion worth of assets, almost half of what it held at the beginning of 2022, according to its website. The firm stopped disclosing its assets under management afterward. CEL, the native currency inside the Celsius ecosystem for earning interest income and paying back debts, remains under downside pressure as it trades almost 84% below its peak level of $8 in April 2021.
Download Nairametrics App for breaking news and market intelligence.