Why Bankrupt Celsius (CEL) Is Up 20% Today. Should You Buy It?

On Tuesday, the presiding judge in the Celsius bankruptcy case ruled that the crypto banking firm can continue mining Bitcoin as a way to eventually pay creditors.

During a virtual hearing on Tuesday, bankruptcy judge Martin Glenn approved the request from Celsius' legal team to continue the crypto firm's Bitcoin mining operations. The Celsius legal representatives said the newly minted assets from the mining would be used for collateral to get new loans as well as eventually be used to make creditors whole.

Judge Glenn agreed to the motion once the counsel for the creditors' committee and the U.S. Trustee's Office noted that they were satisfied with details that Celsius provided to both groups regarding the crypto firm's proposed budget and finances going forward.

As a result of that news, the CEL token is up more than 20% today across cryptocurrency exchanges, adding to its more than 200% price pump per token of $3.07 at press time. That triple-digit jump has occurred since its filing for Chapter 11 bankruptcy protection against lawsuits and creditor claims for now. According to CoinMarketCap, despite its intraday climb, CEL is well off its all-time high of $8.02 per token logged in June 2021.

Chilly times of late for Celsius

This week's favorable ruling is a sunny spot for Celsius and its CEL token, which have been out in the crypto cold the past few months. Things started to snowball for Celsius in June of this year, when the firm froze withdrawals for 1.7 million of its clients in an effort to stay solvent -- sparking a fiery outcry from those blocked asset owners. Since then Celsius has been shoveling its way from beneath its avalanche of debt, paying off hundreds of millions in liabilities, but that wasn't enough to keep it from filing bankruptcy.

The Chapter 11 action sparked regulatory investigations from state agencies in California, New Jersey, Texas, Washington, and Vermont. Unfortunately, bankruptcy restructuring under Chapter 11 laws typically favors the biggest debtors while retail owners get very little or get put on ice altogether.

This is not financial advice, but investors need to fully understand their own level of acceptable risk as well as details of any potential investment. The bankruptcy court's approval to allow Celsius to continue its Bitcoin mining enables the firm to ensure at least one revenue stream to possibly emerge from debt, but it's not a guarantee. So average investors should wait and see before investing in this project right now.