Market Analysis

Celsius Token Spikes—Then Crashes—Amid Firm’s Woes

celsius-token-spikes—then-crashes—amid-firm’s-woes

CEL spiked then plummeted today during what’s been an eventful few days for Celsius.

Key Takeaways

  • Celsius’ CEL token soared over 300% today before crashing minutes later.
  • The move may have been prompted by recent activity on a MakerDAO vault rumored to belong to Celsius.
  • The development follows Celsius’ suspension of customer withdrawals.

The troubled crypto lender Celsius saw its CEL token surge—then crash—today in an apparent short squeeze event. The move may have been triggered by signs of solvency on a wallet rumored to belong to Celsius.

Celsius Shorters Suffer

Celsius’ CEL token briefly spiked before crashing today as the firm faces rumors of possible insolvency. 

CEL crashed with the broader crypto market Monday on the news that Celsius had paused customer withdrawals. It briefly traded as low as $0.095 before recovering to around $0.33 today. It then jumped over 300%, topping $1.42 on multiple exchanges. It hit $1.65 in the CEL/wETH liquidity pool on Uniswap V3, while FTX registered a high of $2.57. However, the token crashed as quickly as it jumped and started to plummet minutes later. It’s trading at around $0.57 at press time. 

The move looks to be what’s known as a “short squeeze,” where a brief spike forces market participants who are short on an asset to buy back their position at a higher price. When short squeezes occur, a domino effect ensues, pushing prices higher. In this instance, CEL jumped then quickly plummeted. 

Celsius is a crypto lending platform best known for offering customers yields on assets like Bitcoin and Ethereum. CEL offers customers benefits such as rewards and discounts on Celsius loans.  

The firm has been facing liquidity issues as the market trends down, which is why froze customer withdrawal, swaps, and transfers Monday citing “extreme market conditions.” Rumors of the firm’s possible insolvency had circulated the crypto space for weeks, but the firm’s CEO Alex Mashinsky has repeatedly denied the claims. 

Today’s short squeeze may have been triggered by recent activity on a MakerDAO vault rumored to belong to Celsius. MakerDAO is an Ethereum-based DeFi protocol that lets users mint DAI when they deposit collateral. The wallet associated with the vault was facing liquidation of its wrapped Bitcoin collateral, but on-chain data shows that it deposited $28.1 million worth of DAI into the vault at 14:58:32 UTC.

Market participants may have interpreted the DAI deposit as proof of the firm’s solvency even though it has not been confirmed whether the wallet belongs to Celsius or not. After the spike, CEL is up from Monday’s low. Nonetheless, it’s still 92.9% short of its peak, and Celsius withdrawals are still paused. 

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.

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