Celsius drops 30% after reaching six-week high

Celsius holders attempted a GameStop-style short squeeze yesterday

Celsius (CEL) logo on a smartphone screen                                 
Celsius holders have been attempting a #CELShortSqueeze – Photo: Shutterstock
                                

CEL, the native token of the cryptocurrency lender Celsius Finance, rose to its highest level in almost six weeks on Tuesday. 

The token had fallen by as much as 92% in the preceding month, from $2.17 to $0.17, after the company was forced to halt withdrawals and suffered substantial losses amid the wider market sell-off. 

The decline of Celsius

Although still small in comparison to traditional banking, cryptocurrency lenders enjoyed significant growth throughout 2020 and 2021, offering depositors healthy returns on their cryptocurrency holders and providing liquidity to new projects. 

In August of last year, Celsius had over $20bn (£16bn) in assets. As of 17 May 2022, the company had $11.8bn in assets and had processed $8.2bn worth of loans.

One of the company’s largest investments was in a staking token named stETH. This let investors stake on the Ethereum blockchain and earn extra returns through a series of decentralised finance (DeFi) strategies. With the onset of the so-called ‘crypto winter’, however, stETH began to trade at a discount and became increasingly illiquid.

With Celsius struggling to raise funds for redemptions when users wanted to withdraw their money, the company halted withdrawals in an effort to avoid a quasi-bank run, citing “extreme market conditions” as the reason for the move. 

#CELShortSqueeze

After weeks of losses, on Tuesday some CEL holders attempted to orchestrate a short squeeze, whereby investors cooperate to drive the value of an asset up and liquidate the short positions against it. Promoting the Twitter hashtag #CELShortSqueeze, they purchased CEL, moved it to decentralised exchanges and then set sell limit orders. 

The effort briefly worked, with CEL rising from $0.6566 to a high of $1.5435 within 24 hours, a 135% increase. At the time of writing on Wednesday 22 June, though, the token stood 30% below this point at $1.07, as the grip of the squeeze began to weaken. 

With Celsius staring down the barrel of insolvency, a number of rival crypto operators have attempted to buy the company out, including Nexo and Chainge.

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