What happened
In a remarkable turn of events, bulls have continued to shift the script for cryptocurrency banking company Celsius (CEL), with the value of this project's CEL token surging 20.6% over the past 24 hours as of 10:30 a.m. ET. Since hitting a low of approximately $0.15 per token in mid-June, CEL has rebounded to more than $3 per token.
Despite recent news that a large Canadian pension fund has written off its stake in Celsius, investors appear to be increasingly bullish on this crypto lender's ability to survive. Higher crypto prices in recent months have helped sentiment across many embattled lenders in this sector. Additionally, news that Celsius has received court approval to sell its mined Bitcoin, as well as a number of liquidity injection offers, appears to have many investors believing Celsius may be able to make it through its restructuring with less damage than initially thought.
So what
It's been a rough year for Celsius, to be sure. In April, Celsius indicated that regulatory issues around the company's Earn product had caused the platform to hold nonaccredited investors' tokens in custody. In May, the collapse of algorithmic stablecoin Terra (LUNC 4.30%) led to contagion fears, sparking a run on the bank among various lenders in the sector, including Celsius. This led to the ultimate freezing of withdrawals, swaps, and transfers in June, a move that in turn drove this token to its mid-June lows.
Like other crypto lenders, Celsius has employed a model whereby depositors can earn higher yields on their deposits, with deposits lent out to borrowers who pay relatively high rates of interest. Celsius pockets the profits on these transactions, much like a bank, and allows holders of CEL tokens to earn preferential yields on their investments. Thus, demand for this token is tied to transaction activity within Celsius' ecosystem.
Now what
Right now, crypto investors appear to be banking on the idea that a resumption of normal lending and borrowing activity can be achieved at Celsius. Its ability to stem its losses via selling its mined Bitcoin (though this doesn't cover its operational expenses and overhead) is a good start. And if a white knight does come in to save the day with a big capital injection, and stability in the overall crypto sector is regained, perhaps Celsius and its CEL token are smart leveraged bets.
That said, Celsius remains significantly underwater with respect to its assets versus its liabilities. Additionally, we've seen some structural cracks in the crypto sector that provide some serious uncertainty for investors looking to scrape the bottom of the barrel right now. Accordingly, those interested in Celsius as a momentum play may want to approach a position cautiously.
