Tuesday, November 29, 2022

Celsius Token Up 65% as Traders Pull Short Squeeze

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Key Takeaways

  • Celsius’ CEL token has jumped 65% in the past 24 hours due to a combination of retail buying and short covering.
  • The #CELShortSqueeze hashtag has helped fuel the rally by bringing exposure to the short squeeze plan.
  • The attempt to squeeze CEL token short-sellers it is reminiscent of the GameStop and AMC Theatre stock short squeezes from January 2021.

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The crypto lender Celsius’ CEL token has become the target of a retail-driven short squeeze.

#CELShortSqueeze Mania Hits the Market 

The CEL token is going parabolic. 

Days after experiencing a brief short squeeze in the wake of Celsius’ insolvency issues, CEL is once again rallying as traders make efforts to flush out short positions. CEL has rallied to $1.37 today, up 65% over the past 24 hours.

The surge came as the #CELShortSqueeze hashtag circulated on Twitter, with dozens of users encouraging their followers to buy CEL tokens and move them off the FTX exchange in an attempt to orchestrate a short squeeze. 

Short squeezes occur in markets when the rising price of an asset forces short sellers to buy back their positions at a higher price. In this instance, users are buying large amounts of CEL via spot markets on centralized exchanges and sending it to non-custodial wallets like MetaMask. This process simultaneously increases the token’s price and shrinks the amount of CEL available for traders to go short. The CEL buyers are hoping that those who have previously opened short positions on CEL buy back their positions as this creates more buying pressure, in turn driving prices higher.

The Celsius short squeeze mania started on Jun. 14 when the pseudonymous crypto trader and Metadrop founder loomdart noticed that CEL was heavily shorted on several centralized exchanges. “Most of the supply is held [by] celsius, the rest is leverage shorted (or equivalent leverage shorted),” he explained in a Twitter post. The initial squeeze pumped CEL’s price from lows of $0.15 to $0.81 in hours, though it quickly tumbled. 

Since then, the price of CEL appeared to have stabilized around $0.50. It began to rally once again on Jun. 19 as the #CELShortSqueeze hashtag started to gain momentum. 

In recent weeks, Celsius has struggled to weather the decline across the crypto market, leading it to freeze customer withdrawals. Though Celsius did not elaborate on its situation beyond citing “extreme market conditions,” it is widely believed that the firm, which uses deposited crypto assets to earn yield for its customers, was facing a severe liquidity crisis after a series of operational blunders. The negative press surrounding the firm likely led to many traders opening short positions on the CEL token as the company’s prospects worsened.  

The current attempt to squeeze CEL short sellers appears to be primarily driven by retail investors as the token’s price action coincides with #CELShortSqueeze trending on Twitter. In this way, it is reminiscent of the unprecedented GameStop and AMC Theatre stock short squeezes that took off on the /r/WallStreetBets subreddit in January 2021. 

CEL slightly cooled off following the run-up. However, the #CELShortSqueeze hashtag is still gaining support on Twitter, potentially creating a threat for new and existing short sellers.

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

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