Crypto lending platform Celsius Network has a gap of around $1.2 billion in its balance sheet, with most of the liabilities owed to its users. In addition, the company has filed for bankruptcy, so its future looks bleak.
Still, Celsius Network’s native utility token CEL has soared more than 4,100% in the past two months, hitting around $3.93 on Aug. 13 from its low of $0.093 mid- June.
In comparison, major coins Bitcoin (BTC) and Ether (ETH) have risen by 40% and 130% over the same period.
Takeover Rumors Behind CEL Explosion?
Technically, rising prices made CEL an overvalued token in early August when its Relative Strength Index (RSI) broke through the 70 threshold.
Takeover rumors appear to be behind CEL’s bullish strength. Notably, Ripple wants to buy the assets of Celsius Network, according to an anonymous source quoted by Reuters August 10.
Reuters reported that Ripple was interested in Celsius assets, but there is no confirmation from either company yet. Celsius has halted withdrawals from the platform since June and filed for Chapter 11 bankruptcy, which will allow them to gradually repay what they owe.
— Tajo Crypto (@TajoCrypto) August 10, 2022
CEL’s price more than doubled after the news broke.
In July, rumors also surfaced about Goldman Sachs intend to acquire Celsius Network for $2 billion. CEL was changing hands for as little as $0.39 at that time.
Short CEL price squeeze
An army of retail traders also appears to be behind the giant bullish push in CEL over the past two months.
Some traders staged a short squeeze to limit CEL’s downside outlook. A short squeeze occurs when the price of an asset suddenly rises, causing short sellers to buy the asset back at a higher price to close out their positions.
Bitcoin and Celsius Update
BTC is very choppy, so I’m focusing on altcoins and CEL. I would like btc to hold 22k for a bullish bias. Cel wants to get away again, I’m looking to buy more above 2.6 with #CELShortSqueeze army behind, could CEL pump $3 next?
APPRECIATED LIKES/RETWEETS pic.twitter.com/5axZiwcl1Q
– WSB crypto module (@traderrocko) August 12, 2022
It is possible to create a short squeeze due to the lower circulating supply of CEL, mainly due to the Celsius Network token transfer freeze.
Interestingly, FTX had about 5.1 million CEL tokens on August 13, approximately 90% of all total circulation through exchanges. Meanwhile, the amount of short positions opened on the exchange was around 2.66 million CEL against the monthly high of 2.96 million CEL on August 11.
In other words, short traders closed around 300,000 CEL positions in just two days.
What’s next for Celsius?
Short squeezes are difficult to maintain over a long period, the story shows.
Such an outlook exposes CEL to the risk of facing an extreme correction in the coming weeks or months. As noted, the token is already overbought, which further adds to the downside outlook.
Drawing a Fibonacci retracement chart from a high of $6.5 to a low of $0.39 produces tentative support and resistance levels for CEL. Notably, the token is now eyeing a break above its 0.618 Fib line (~$4.21), with its upside target at $5.25, up 45% from today’s price. .
Related: Crypto Markets Rebounded and Sentiment Improved, but Retail Has No FOMO Yet
Conversely, a break below the support level at the 0.5 Fib line (~$3.48) risks sending the CEL down towards $2.75, down 25% from the price level current.
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