Rumors that Ripple will buy are helping an altcoin project listed on Binance rise 4000%. But is there enough momentum for further upside action?
Crypto lending platform Celsius Network has a gap of approximately $1.2 billion on its balance sheet. It also still owes most of its investors. In addition, the firm has filed for bankruptcy protection. Therefore, the future looks bleak.
Still, Celsius Network's token CEL has risen over 4,100% in the past two months. It hit around $3.93 on August 13, compared to the mid-June low of $0.093. By comparison, the biggest cryptos Bitcoin and Ethereum rallied 40% and 130% over the same period.
Technically, the price rally made the CEL an overvalued token in early August when the RSI index rose above the 70 threshold. Takeover rumors are one of the catalysts behind CEL's upside strength. According to an anonymous source quoted by Reuters on August 10, Ripple is looking to buy the assets of Celsius Network. As Coinactual.com, we have covered the details in this article.
The price of CEL more than doubled after the news broke. In July, rumors also surfaced about Goldman Sachs' intent to acquire Celsius Network for $2 billion. CEL was trading as low as $0.39 at the time.
It looks like an army of individual investors is behind CEL's huge rise in the last two months. Some investors held a short contraction to limit the CEL's bearish expectations. A short squeeze is when the price of a crypto suddenly rises, forcing it to buy back at a higher price to close short positions. For this, we saw organizations under the tag CEL short squeeze on Twitter.
Due to CEL reducing circulating supply, it is possible to create a short squeeze, primarily due to the freezing of Celsius's token transfers. Interestingly, FTX had around 5.1 million CEL tokens on August 13. In other words, it held about 90% of the total circulation between exchanges. Meanwhile, open interest on the exchange was around 2.66 million CEL, compared to the monthly high of 2.96 million CEL on August 11.
In other words, short-term traders closed nearly 300,000 CEL positions in just two days.
Historical data shows that it is difficult to maintain short squeeze for long periods of time. This puts the CEL at risk of overcorrection in the coming weeks or months. As said, the token is already overbought. As a result, it further strengthens the bearish outlook.
On the technical side, charting a Fibonacci retracement from the $6.5 high to the $0.39 low will reveal temporary support and resistance levels for the CEL. Specifically, the CEL is now seeing a break above the 0.618 Fib line ($4.21). Its upside target is $5.25, up 45% from today's price.
Conversely, a break below the support level at the 0.5 Fib line ($3.48) risks putting the CEL down 25% from the current price level to $2.75.
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