The heat wave is measured in Celsius – The cryptocurrency market lacks competition in terms of irrational stories. At least at first sight. Indeed, how can the token issued by a bankrupt crypto lending platform experience such growth? The company is still not out of the woods and user funds are still frozen. The CEO is trying to get rid of some chips.
Celsius no longer works, the price flies away
The story of Celsius is unfortunately not an isolated one. The loss of parity of the stablecoin UST with the dollar last May created many swirlsand several bankruptcies. Much of the ecosystem was exposed to it (with the funds of their users) in order to be able to offer returns of up to 20% annually in stablecoins.
The setbacks of Celsius being public, many market players wanted to take advantage of it. The influx of bad news and the risks of insolvency have fueled the interest of traders (amateurs and confirmed) for a “short” position. They therefore positioned themselves as short sellersanticipating a fall in the price of the CEL token.
As Raptor Crypto notes, the CEL chart is head-spinning. Even more to those exposed recently. Celsius has suspended its services to clients, but its token is still listed on various crypto exchanges, such as FTX. News, liquidity phenomena, emotions and speculation. Here is the recipe that propelled the token over 4,000% in 2 months.
Media pressure and the company’s poor posture prompted many speculators to bet against its token. So that the bankruptcy of Celsius “is beyond doubt” for a majority of them. The latter have therefore positioned themselves for sale on a “future” derivative contract (allows betting on the rise/fall of an asset).
Times change but not human psychology
Unlike a position spota position future generates a liquidation threshold. A single price which, if exceeded by the asset, closes the position and uses this liquidity to inject it into the price, at the liquidation price.
In the case of the CEL crypto, a majority of participants had been positioned lower for several weeks. What mechanically makes you fat “ the liquidity envelope » available above the liquidation thresholds of the short positions. This situation creates the favorable environment for a squeeze “, a ” squeeze shorts ” in this precise case.
If the price reaches the first thresholds of liquidation, then the price can begin to chain the liquidations (forced closing of a position) of sellers. The seller thus finds himself a buyer and thus propels the price vertically. According to aggressiveness with which the sellers were positioned (leverage), price action can get totally wild. But not irrational either. Simply fueled by liquidity phenomena, operated by the most seasoned traders.
If it were necessary to recall it again, trading is a profession, which is carried out after years of study and risk-taking. Without having the assurance of being profitable. Cryptocurrency trading is even riskier because assets are highly volatile. This is why many Sunday traders end up coming to terms with the facts and become simple investors again. Less stress, less risk of seeing your capital melt under the pressure of the Celsius…
Take advantage of the opportunities to buy low-cost cryptos that the market offers us! Don’t necessarily jump on a token that has done 4,000% in recent weeks… but don’t miss the opportunity of a lifetime either, register without delay on the FTX reference crypto exchange platform. In addition, you benefit from a lifetime reduction on your trading fees (commercial link, see conditions on official website).