The token of embattled crypto lender Celsius Network could recover in the future despite the current actions of its management team, some traders say.
Celsius filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York late Wednesday. The filing followed a company decision to pause withdrawals, swaps and transfers on its platform in June citing “extreme market conditions.”
A Chapter 11 filing is frequently referred to as a "reorganization" bankruptcy, meaning the debtor remains “in possession” of and may continue to operate the business, and can borrow new money with court approval. The code is mostly used by large businesses to help them reorganize their business debts and repay their creditors while continuing their operations.
The proceedings have put focus on and sparked concerns about the long-term growth of CEL, Celsius’ native token. CEL was used in exchange for services and as a reward on Celsius, with wallet balances having over 20% of their holdings in CEL tokens obtaining a 30% bonus interest and 30% loan interest discount.
CEL dropped in price by over 10% in the past 24 hours amid selling pressure. Some, however, say the CEL token could see a recovery in the coming weeks as Celsius restructures its business.
“It’s crucial to observe the price changes in combination with the actions taken by Celsius’ management team,” said Anton Gulin, business director at crypto exchange AAX. “They handled the crisis very well, repaying their debt, freeing collaterals and applying for a specific bankruptcy clause, where they restructure the business rather than close the shop.”
“Eventually, the investors capitulated over the weeks, but I assume some may have simply reentered at the better price they’ve had before. We can think of this as a good foundation for a fresh start,” Guilin added.
Others, however, see short-term price action to mirror the broader crypto market. “CEL token, or the value of any token, is inextricably linked to the project behind it,” said Joshua Schewitz, an analyst at crypto management platform Kirobo.
“In my view, the short-term outlook is likely to be negative both due to the overall market conditions and the company's current status. That said, when Celsius halted withdrawals in mid-June, the CEL community banded together and pushed the price up in a short squeeze,” Schewitz added.
Search queries for "#CELshortsqueeze” trended on Twitter Thursday morning as Crypto Twitter participants banded together to prevent short traders from affecting the market dynamics of the token.
“I’m not sellin,” one Twitter user claimed. Another said, “The worst possible news came out (chapter 11) and the shorts still can not make a lower low. The plan to make them pay is still in play. $CEL #CelShortSqueeze”
Meanwhile, some market observers said Celsius' legal proceedings and their effects on CEL would be of "great interest."
"This case is of great interest to the current crypto scene," said Edwin Mata, CEO of tokenization platform Brickken. "We have a company undergoing a legitimate bankruptcy procedure, which has a token with thousands of holders in different jurisdictions and a token which directly affects the auditing procedure that Celsius will be beginning soon."