celsius network

Novogratz’s Galaxy Digital to acquire Celsius’ GK8 in bankruptcy garage sale

The self-custody platform was acquired by Celsius in 2021 for $115 million and is now set to change hands, pending approvals.

Mike Novogratz-led investment firm Galaxy Digital Holdings has won the bidding to buy GK8, an institutional digital asset self-custody platform owned by Celsius Network — pending court approvals and certain closing conditions.

According to a Dec. 2 blog post from GK8 and a press release from Galaxy, if the acquisition goes ahead, Galaxy will acquire the platform’s nearly 40-strong team as part of the deal including cryptographers and blockchain engineers and an office in Tel Aviv.

GK8 is a self-custody platform for managing blockchain-based assets which offers custody, staking, decentralized finance (DeFi), nonfungible token (NFT) support, tokenization and trading.

The team behind the platform claims it can run secure blockchain transactions without being connected to the internet, severely reducing the risks of hacks.

Celsius acquired GK8 in 2021 for $115 million, though Galaxy has not disclosed how much it offered during the bidding process.

Mike Novogratz, founder and CEO of Galaxy called the acquisition a “crucial cornerstone in our effort to create a truly full-service financial platform for digital assets.”

“Adding GK8 to our prime offering at this pivotal moment for our industry also highlights our continued willingness to take advantage of strategic opportunities to grow Galaxy in a sustainable manner,” he added.

Galaxy intends to support GK8’s ongoing operations while utilizing its technology to develop its trading platform GalaxyOne it said.

GK8 founders, including CEO Lior Lamesh and chief technology officer Shahar Shamai, are expected to stay with the company and lead Galaxy’s new custodial business.

“With the backing of Galaxy, we aim to introduce new and exciting offerings to the industry that showcase a combination of Galaxy’s best-in-class services and GK8’s cryptography, security, and unparalleled R&D skills,” Lamesh said.

Celsius has been undergoing bankruptcy proceedings since filing for Chapter 11 bankruptcy protection on Jul. 13, discussing plans to sell some of its assets.

In the court filing, Celsius CEO Alex Mashinsky indicated the company could sell Bitcoin (BTC) mined by its mining operation to help repay at least one of its loans and provide revenue for the company in the future.

While in a Sept. 15 filing with the United States Bankruptcy Court for the Southern District of New York, Celsius asked for permission to sell its stablecoin holdings.

Galaxy Digital was recently named in a $100 million lawsuit by institutional crypto custodian service and wallet operator BitGo for dropping its plans to acquire the firm.

Galaxy terminated the May 2021 agreement to acquire the firm on Aug. 15, 2022, citing a breach of contract by BitGo when it allegedly failed to deliver audited financial statements by July 31, 2022.

BitGo then revealed in Sept. 13 post that it was seeking more than $100 million in damages, accusing Galaxy of “improper repudiation” and “intentional breach” of its acquisition agreement with BitGo.

Celsius Network’s bungling showed why centralization can’t protect privacy

Celsius’ bankruptcy proceedings resulted in 14,000 pages of customer data leaking to the public. The incident displayed the pitfalls of centralized finance.

In Celsius Network’s recent court filing, the billion-dollar centralized finance (CeFi) platform exposed more than 14,000 pages of customer identity and on-chain transaction data without user consent — a prescient reminder that privacy absent decentralization is no privacy at all.

As part of its bankruptcy proceedings, CeFi lending giant Celsius Network disclosed names and on-chain transaction data of tens of thousands of its customers in an Oct. 5 court filing. While Celsius’ user base complied with standard Know Your Customer (KYC) procedures in order to open personal accounts with the CeFi platform, none consented to nor could have anticipated a mass disclosure of this scope or scale.

In addition to doxxing the multi-million dollar withdrawals of Celsius founder Alex Mashinsky and chief strategy officer Daniel Leon just before Celsius’ bankruptcy announcement, the disclosure directed tens of thousands of CeFi users to reconsider what resolute privacy protections entail and how systems that incorporate any degree of trust or centralization stand to compromise those protections.

To protect privacy, any degree of centralization or specialized authority that exchanges use in the future must eschew the bungled Celsius model. Otherwise, privacy will be rendered yet another false promise teased out in the fine print.

Uncharted territory

While unsavory, at the very least, Celsius’ mass data dump points to more than an outright distrust of authority and opaque organizations. As per usual, at the intersection of on-chain finance and law, there’s a lot of gray area.

An emergent and nascent industry, the blockchain space has already spun up a mess of unprecedented conflicts and disputes that neither existing legislation nor established case law has developed a reliable methodology to navigate. Even in the heavily nuanced legal environment of 2022, courts are not adequately prepared to uphold established legal principles in the on-chain domain.

In defense of their customers, Celsius’ legal representatives allege that they issued requests to redact private customer data from their disclosures. However, their requests were ultimately rejected by the court on the grounds that all Chapter 11 Bankruptcy proceedings require a complete and transparent “Creditor Matrix.” Obviously, such a bankruptcy rule was penned and passed several eras before the emergence of distributed on-chain lending protocols; a time when financial institutions did not have 14,000 pages worth of supposed creditors.

To make matters more unclear, Celsius legal officials have also claimed that, as per Celsius’ terms of service, all user funds deposited in the platform essentially belong to Celsius. Thus, as a self-regarded de-facto owner of all customer deposits, Celsius’ public release of customer transaction data treads further into hazy legal territory as to the parameters that define ownership — and, therefore, privacy protections — in the on-chain space.

Whatever the case, Celsius’ customers have permanently lost their privacy. The only sure verdict is that there can be no certainty in depending on an unprepared legal system to uphold privacy rights in fluid and uncharted territory.

Celsius isn’t alone

Although dramatic, Celsius’ meltdown is only the most recent in a stint of CeFi industry bankruptcies. The platform’s billion-dollar deficit presented in bankruptcy filings has been much less the exception than the rule.

Once one of crypto’s dearest and most powerful CeFi platforms, Celsius’ rise and downfall serve as a painful reminder to crypto critics and advocates alike that a core team can become a singular point of failure at any time. And further, centralized KYC procedures always carry some risk of exposure in legal proceedings.

The predicament tens of thousands of innocent crypto investors now face points to a much broader principle: that privacy cannot be truly conferred nor absolutely protected within the confines of a centralized system. Even with the best intentions in mind, professionals on both sides of the court have little legal precedent to draw from as they navigate the novel and perplexing territory.

As on-chain data analytics become more sophisticated, hackers more conniving and personal data ever more valuable to marketing agencies and authorities, privacy-conscious individuals must exercise the utmost prudence in determining which crypto platforms best align with and protect their interests.

After all, Google, Meta, and the rest of the Web2 platforms that the crypto community has since dismissed as exploitative and archaic are about as private as Celsius and its CeFi counterparts. Each provides privacy as a service. Meanwhile, its users’ search histories, account information and browsing preferences are private to almost everyone — except, of course, the platform itself. As Celsius’ bankruptcy proceedings have proven, even the most well-intended custodians are not a sufficient substitute for decentralized architecture.

The true promise of systems built on blockchain is that what they confer, be it asset ownership, scarce monetary units or permissionless contracts, cannot be regulated, erased or modified on a whim. Their constitutions are written in code. Any and all modifications are coordinated and executed by decentralized autonomous organizations ( DAOs). There is no trust between counterparties, only a shared belief in the permanence of principle and the wisdom of the collective.

In the same way, privacy has been a prerequisite for personal freedom and self-expression since time immemorial, decentralization is today a prerequisite for privacy online — and, to that end, on-chain.

Alex Shipp is the chief strategy officer at Offshift, where he contributes to platform tokenomics, produces content and conducts business development on behalf of the project. In addition to his industry role as an expert in private decentralized finance (PriFi), he has also served as a writer at the Elastos Foundation and as an elected ecosystem representative on the Cyber Republic DAO.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Celsius founder reportedly withdrew $10M before bankruptcy filing: FT

The details of the withdrawal will reportedly be part of upcoming court filings, and it’s possible the founder and former CEO of the crypto platform could be forced to pay it back.

Celsius Network founder and former CEO Alex Mashinsky allegedly withdrew $10 million from the crypto lending platform just weeks before the company froze customer funds and declared bankruptcy.

The withdrawal was cited by sources from the Financial Times who said Mashinsky withdrew the funds in “mid to late May” prior to the June 12 pause on all withdraws.

Celsius was a popular crypto-lending platform with 1.7 million customers and $25 billion in assets under management but the prevailing poor crypto market conditions eventually led the company to a $2.85 billion gap in its balance sheet.

This led Celsius to pause customer withdraws in June before filing for Chapter 11 bankruptcy in July, with Mashinksy attempting to restructure and revive the company to be based around crypto custody services.

The withdrawal raises questions about whether Mashinsky knew ahead of time that the company would be freezing customer funds and withdrawals.

However, a spokesperson for Celsius told FT that the founder withdrew cryptocurrency at the time to pay state and federal taxes.

“In the nine months leading up to that withdrawal, he consistently deposited cryptocurrency in amounts that totaled what he withdrew in May,” the spokesperson said, adding Mashinsky and his family still had $44 million worth of crypto frozen on the platform.

Meanwhile, sources told the FT the withdrawal was pre-planned in line with Mashinsky’s estate planning.

Roughly $8 million worth of assets withdrawn were used to pay income taxes arising from the yield the assets produced, and the remaining $2 million was made up of the platform’s native token Celsius (CEL).

The questions will likely be answered when the transactions in question will be presented by Celsius in court in the next few days as part of disclosures by the crypto-lender regarding its finances.

There’s also a possibility Mashinsky could be forced to return the $10 million as in the 90 days leading up to a bankruptcy filing, payments by a company can be reversed to benefit creditors under United States laws.

Mashinsky resigned as CEO of Celsius on Sept. 27 saying his role “has become an increasing distraction” but said he would continue to focus on helping find a plan to return funds to creditors.

NEXO risks 50% drop due to regulatory pressure and investor concerns

Analysts fear NEXO price could come under pressure if regulatory action in the United States begins to intensify.

Crypto lending firm Nexo is at risk of losing half of the valuation of its native token by the end of 2022 as doubts about its potential insolvency grow in the market.

Is Nexo too centralized?

For the unversed: Eight U.S. states filed a cease-and-desist order against Nexo on Sep. 26, alleging that the firm offers unregistered securities to investors without alerting them about the risks of the financial products.

In particular, regulators in Kentucky accused Nexo of being insolvent, noting that without its namesake native token, NEXO, the firm’s “liabilities would exceed its assets.” As of July 31, Nexo had 959,089,286 NEXO in its reserves — 95.9% of all tokens in existence.

“This is a big, big, big problem because a very basic market analysis demonstrates that Nexo would be unable to monetize a significant chunk of these tokens,” noted Mike Burgersburg, an independent market analyst and author of the Dirty Bubble Media Substack, adding:

“Given that fact, the true value of the $NEXO tokens on Nexo’s balance sheet is likely close to $0.”

NEW: “IS NEXO NEXTO?”

According to state regulators, Nexo is insolvent without counting $NEXO tokens on their balance sheet.

This is the same situation Celsius Network was in… and basic market analysis suggests real value of their $NEXO is ~$0 https://t.co/txt1kOSydH

— dirtybubble.usd (@MikeBurgersburg) September 28, 2022

Comparisons with Celsius

Burgersburg also alleged that Nexo faces insolvency risks because it holds the vast majority of NEXO’s token supply on its platform. He drew comparisons to Celsius Network, a now-defunct crypto lending firm that owned more than 50% of its native token, CEL.

*The top 100 NEXO holders collectively own 95.53% token supply. Source: Etherscan*

Celsius ended up holding over 90% of the total CEL tokens in circulation after attracting deposits and collateral from customers. This made CEL extremely illiquid and, thus, volatile. In other words, CEL became a deeply imperfect asset for patching Celsius’ troubling balance sheets.

“NEXO token is even more illiquid than the bankrupt Celsius Network’s CEL token,” warned Burgersburg, noting that the token’s average daily trading volume comes to less than 1% of its market capitalization.

However, a Nexo spokesperson denied the allegations, clarifying that the data they provided to Kentucky regulators was for one of the Nexo Group’s entities.

“We can confirm that on a consolidated basis, NEXO tokens represent less than 10% of the company’s total assets,” they told Cointelegraph, adding:

“That, in return, exceeds the company liabilities even when excluding the company’s net position in NEXO tokens.”

As to why Nexo holds more than 90% of the NEXO supply, the firm’s spokesperson cited the token’s economics and utility, saying that they create natural incentives for clients to keep their tokens on the platform.

“In addition to earning higher interest rates on their digital asset balances by holding NEXO tokens on the Nexo platform, clients can use NEXO tokens as collateral, earn interest on them and exchange them directly on the Nexo platform,” they explained, adding:

“The same is true for the tokenomics of companies with similar value propositions such as FTT, BNB and CRO, held predominantly on FTX, Binance and Crypto.com, respectively.”

NEXO price could get rocky

The fear, uncertainty and doubt surrounding the rumors of market volatility or stringent regulation against crypto lending platforms could create negative investment sentiments toward NEXO. Unfortunately, the token’s technical setup suggests the same.

Notably, NEXO’s price has been forming what appears to be an ascending triangle on its longer-timeframe charts since June 12. Ascending triangles are considered bearish continuation patterns in a downtrend, which makes NEXO susceptible to extreme price declines.

By the rule of technical analysis, an ascending triangle resolves after the price breaks below its lower trendline and continues falling in the same direction until it reaches the level that is at length equal to the triangle’s maximum height.

This setup is illustrated in the chart below.

*NEXO/USD 3-day price chart featuring ascending triangle breakdown setup. Source: TradingView*

In the event that the pattern confirms, the price of NEXO could fall toward $0.47, down about 50% from its current price.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Want to keep exchanges like Celsius from seizing your money? Be a ‘custody client’

Are your coins at risk of being seized by an exchange in the future? Here are some factors to consider related to using centralized exchanges.

Disgraced cryptocurrency lender Celsius Network asked a court this month to return assets to its “custody clients,” but not to its “earn-and-borrow” customers. Wondering how to keep yourself in the former group when the crypto exchange you’re using goes under? Here’s a summary.

What exactly is a “custody client?” It’s similar in principle to a savings account with a traditional bank — often repayable upon demand by the custodian. In this case, it’s Celsius that has a fiduciary responsibility.

This type of account is kept separate from an “earn-and-borrow” account. It includes coins that can be transferred, swapped or used as loan collateral, but they don’t earn rewards. Purchased or transferred coins will go to your custody account. It is estimated Celsius has approximately 74,000 custodian accounts.

In contrast, coins in your earn-and-borrow account will earn rewards but can’t be swapped or used as loan collateral. This applies to stakers and — obviously — borrowers.

The bankruptcy court has scheduled a hearing for Oct. 6. The argument Celsius put forward is that custody clients retained “beneficial ownership” of their coins, so they don’t form part of Celsius’ bankruptcy estate.

*Financial Statement from Celsius Network’s Bankruptcy Filing*

Celsius follows Voyager Digital and Hodlnaut, which, on Aug. 29, were put under interim judicial management — “intensive care” in insolvency speak. And they will not, in my view, be the last during this crypto winter. Crypto carnage is underway, but the question is: What key lessons can be learned from Celsius’ downfall? Are your coins at risk of being placed in the “wrong kind of account” in the future? Let’s examine.

Celsius, founded in the United States in 2017, claimed to have 2 million users across the world as of June 2022. It had raised substantial sums from investors, estimated at $750 million as of late 2021. The company’s business model drew some parallels to a traditional bank — using the concept of fractional reserving — receiving deposits from crypto investors searching for a yield and, subsequently, providing loans to earn a margin, profits if you like. But what factors and events possibly contributed to Celsius’ demise into its unenviable position — the insolvency abyss?

Firstly, it seems as though Celsius’ strategy relied upon a continuous bull market to keep liquidity flowing — more new users depositing on the platform to satisfy the rewards and withdrawals of existing users. A Ponzi-type structure? Perhaps. A strategy orchestrated by leadership — most definitely. They decided to bet on either black or red, compounded by overall poor investment decisions. According to numerous sources, Celsius CEO Alex Mashinsky took control of Celsius’ trading strategy only a few months before its demise, often overruling experienced investment managers.

In addition, it often positioned itself as a high annual percentage yield (APY) provider relative to other decentralized finance (DeFi) platforms — particularly, its CEL tokens, where returns of 20% were being offered. This raises the question as to whether such rates were sustainable in a cyclical downturn. When lending out depositors’ crypto, it seems the risk profile of these borrowers was high — high in reference to credit and default risk. Traditional banks have had decades of experience and data to draw upon and refine their credit risk procedures before lending. I doubt Celsius had the same depth of expertise.

And then came the liquidity crunch came — similar to the run on the Northern Rock bank in the United Kingdom back in the 2008 financial crisis. Because of the concept of fractional reserving, no bank or lending institute is able to simultaneously satisfy withdrawal demands if a proportion of depositors all come calling at once. Celsius recognized this and thus froze withdrawals and trading activity as soon as the alarm bells rang.

On balance, whatever its fate, Celsius has contributed to the development and evolution of crypto and DeFi, akin to inventors whose ingenious inventions just fell short of commercial success. They played a vital role in the process and allowed others to succeed. Valuable lessons can be learned, and the teachings applied.

Further mitigating factors reside in a series of crypto events — Terra’s LUNA Classic (LUNC) and TerraClassicUSD (USTC) crash and the BadgerDAO hack. Celsius had exposure to both, which culminated in a financial impact that punched holes in its balance sheet. Macroeconomic events of rising global inflation no doubt played a part. With a glut of “new money” printed by governments during the pandemic, its increasing velocity through the system coupled with supply chain issues only added more fuel to the crypto speculative bubble and bust.

So, what are three key lessons that can be learned from Celsius’ plight?

Firstly, whether you are a custody or earn-and-borrow account holder, it will come down to the facts — it’s not a matter of choice. While it will almost certainly boil down to a legal determination, in my opinion, the economic substance of your activity should be considered. Even then, I suspect Celsius will argue for a narrow definition of “custody” in this context, and don’t be surprised if there are clawback clauses. They have openly stated their intention to file a plan that will provide customers with an option to remain long crypto.

Secondly, it’s become a bit of a cliché, but the mantra of “not your keys, not your coins” rings true. The risks of custodial wallets are now apparent. Investors whose crypto is locked on a platform are more likely to suffer losses. Under insolvency laws, investors are classified as unsecured creditors, and even if they are a custody client, the probability is they will receive a fraction — if anything at all — of their portfolio value.

Lastly, if an APY reward is too good to be true, then perhaps it is. In Celsius’ case, the problem was compounded by the offering of near sub-zero loan interest rates of 0.1% APY. Simple math suggests its business model was not robust at all.

Only time will tell what emerges from the rubble of this catastrophe. If history is to teach us anything, it is that bear markets are often the catalyst for attention to be focused on innovation and utility — the Web 1.0 and 2.0 dot.com era is testimony to this. Consolidation, mergers and acquisitions are definitely on the horizon, and with it will emerge the new Amazons and eBays of the cryptoverse.

Tony Dhanjal serves as the head of tax strategy at Koinly and is its PR and brand ambassador. He is a qualified accountant and tax professional with more than 20 years of experience spanning across industries within FTSE100 companies and public practice.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Learn from Celsius — stop exchanges from seizing your money

Are your coins at risk of being seized by an exchange in the future? Here are some factors to consider related to using centralized exchanges.

In contrast, coins in your earn-and-borrow account will earn rewards but can’t be swapped or used as loan collateral. This applies to stakers and — obviously — borrowers.

So, what are three key lessons that can be learned from Celsius’ plight?

Celsius co-founder declares his equity is ‘worthless’ in court

It’s unclear if the court declaration by Leon will have any bearing on the value of the shares still in circulation.

A Celsius Network co-founder has moved in court to declare the entirety of his equity stake in the embattled crypto company as “worthless.”

In a Monday document to the United States Bankruptcy Court, law firm Kirkland & Ellis LLP filed a declaration on behalf of Celsius Co-Founder Daniel Leon, confirming his status as a substantial shareholder and declaring that his 32,600 common shares are now considered worthless.

#CelsiusNetwork #CelsiusBankruptcy Here’s a new one — a declaration of “wothlessness” was just filed by Daniel Leon , one of the cofounders. The Declaration was filed by K&E. https://t.co/OHldovdhBZ

— David Adler (@DavidJAdler1991) September 5, 2022

A declaration that a particular stock or common share is “worthless” generally occurs when shareholders in a company think they will not receive any further distribution for their holdings.

According to the IRS, a stock is worthless when a taxpayer can show the security had value at the end of the year preceding the deduction year and that an identifiable event caused a loss in the deduction year.

The embattled crypto lender filed for Chapter 11 bankruptcy in July, a month after halting withdrawals due to “extreme market conditions.”

BnkToTheFuture CEO Simon Dixon suggested in a Monday Twitter post that the declaration means that Celsius Network private equity shares are now “officially worthless” and that the co-founder wants to use them as a tax write-off.

I guess this is the official update that @CelsiusNetwork shares are officially worthless & the co-founder wants to use them as a tax write-off. At least shareholders understood the risks though it’s still painful for the community that invested in them. https://t.co/W9Q2GuCU9H

— Simon Dixon (Beware Impersonators) (@SimonDixonTwitt) September 6, 2022

Celsius raised two rounds of private equity funds from smaller investors via BnkToTheFuture.

Meanwhile, Celsius Network’s cash runway appears to have stretched. While a filing last month forecasted the company to be out of money by October, a new forecast appears to show the company has managed to get more breathing room.

The latest forecast, dated Aug. 31 and filed to the United States Bankruptcy Court on Tuesday. has the firm sitting on just over $111 million in cash currently, forecasting $42 million cash left by the end of November.

CEL climbs 50% as Celsius Network aims to return $50M to clients

The CEL price rally could fizzle out due to prevailing Celsius issues, including its bankruptcy.

The price of CEL soared by nearly 50% as traders assessed its parent firm Celsius Network’s inclination to return a portion of the locked funds to its customers.

No CEL-ling pressure for now

On the daily chart, CEL surged to its intraday high of $1.67 per token on Sept. 2 after lows of $1.15 the day before. However, the token’s sharp rally accompanied lower trading volumes, suggesting a lack of conviction among traders about further upside moves.

*CEL/USD daily price chart. Source: TradingView*

CEL’s gains appeared after Celsius Network filed a motion with the Bankruptcy Court, requesting that its clients with “certain Custody and Withhold accounts should be able to withdraw the amount of digital assets owed to them.”

Celsius pulled itself up by taking cryptocurrencies from its clients and offering them mouth-watering returns by deploying their deposits in the broader crypto lending market.

But the market downturn this year created a $2.85 billion hole in Celsius’s balance sheet, prompting the firm to freeze its clients’ accounts, thus trapping billions of dollars of more than a million accounts. In July, Celsius filed for Chapter 11 bankruptcy.

CEL price at risk of 40% drop

Celsius Network’s willingness to return a portion of Custody funds to clients is a welcoming move. However, the amount offered is little compared to what the firm holds, as BnkToTheFuture CEO Simon Dixon points out.

#Celsius currently stating that those that were moved to custody 90 days before filing should be withheld. Custody is now $210m & they want to release $50m. They want to reserve the rest for clawbacks. They believe all earn funds belong to #Celsius OPINION This is illegal bank https://t.co/efGb3XPU2b

— Simon Dixon (Beware Impersonators) (@SimonDixonTwitt) September 1, 2022

Meanwhile, Celsius’s interest-bearing accounts, called Earn accounts, had about $4.2 billion worth of crypto assets as of July 10, according to the court documents. In other words, CEL’s 50% price rally now looks overextended, with negative fundamentals still hanging over the Celsius market.

From a technical perspective, CEL is also at risk of a sharp price correction in September.

On the four-hour chart, the Celsius token has been painting a “rising wedge” since late August. This classic pattern typically leads to a bearish price reversal move, as illustrated in the chart below.

*CEL/USD four-hour price chart featuring rising wedge breakdown setup. Source: TradingView*

CEL now tests the wedge’s upper trendline for a pullback toward the lower trendline. The latter trendline is near $1.34, a level that has served as a reliable support in recent trading history. Therefore, breaking below $1.34 could intensify the selling pressure.

CEL falling below $1.34 opens the door for a rising wedge breakdown setup. CEL’s downside target, as a rule of technical analysis, would be as low as the maximum distance between the wedge’s upper and lower trendline when measured from the breakout point.

In other words, CEL could fall to $0.87 by September end, down 40% from the price on Sept. 2.

Court filings reveal Celsius will run out of money by October

Celsius Network has been heading down a slippery slope since it filed for bankruptcy in July.

Embattled crypto lender Celsius Network is on track to run out of money by October, according to the firm’s latest Chapter 11 documents.

Filed on Sunday to the United States Bankruptcy Court of the Southern District of New York, Celsius highlighted that it is expected to reach negative liquidity by October 2022 to approximately $34 million.

The lending platform, which held the trust of many across the world with life savings and retirement funds, was revealed to be in a much worse financial position than originally suggested in July.

Court documents revealed this week that Celsius’ three-month cash flow forecast, which shows steep declining liquidity, indicates the company will experience an approximate 80% drop in liquidity funds from August to September.

The forecast predicts Celsius will continue to report a negative cash flow and, by October, completely run out of money. Over the next three months, the company is expected to accumulate a negative net cash flow of $137.2 million.

Previous court documents revealed that Celsius “operates one of the largest mining enterprises in the United States” and prior to filing for bankruptcy, had expansion plans to “mine Bitcoin by acquiring and making operational additional mining rigs.”

Last week many got very upset with me as I said @CelsiusNetwork would run out of money & solutions needed to be acted upon faster. I was told I don’t understand Chapter 11. They have now confirmed they run out of money by October. https://t.co/CyzjgKpId7 pic.twitter.com/vBIRIGEmG2

— Simon Dixon (Beware Impersonators) (@SimonDixonTwitt) August 15, 2022

These findings come after Reuters reported last month that the struggling crypto lending platform was approved by U.S. Bankruptcy judge Martin Glenn to build a new Bitcoin mining facility using existing funds up to the amount of $3.7 million, with an additional amount of $1.5 million approved to be spent on “customs and duties on imported Bitcoin mining rigs.”

The document stated that Celsius is mining approximately 14.2 BTC per day, owning 80,850 mining rigs, of which 43,632 were operational. Despite the alarming numbers that their cash flow forecast suggests, the amount of Bitcoin, the company predicts, it will mine each year is more promising. Having mined a total of 3,114 BTC in 2021, Celsius projected mining more than 10,100 BTC in 2022, with a steady rise to 15,000 BTC in 2023.

Despite Celsius continuing their mining activities, it has ceased monetizing the Bitcoin generated upon filing Chapter 11 petitions, with the company now being “financially constrained.”

Celsius is yet to release a monthly statement on its website. The most recent statement the company released on July 13 was a disclosure that their “strong and experienced team” had voluntarily filed for a Chapter 11. The company kept the dire news positive, reasoning that it is “to provide the company with the opportunity to stabilize its business” to “maximize value for all stakeholders.”

The reaction on social media has been mixed, with some people on Twitter staying hopeful that the Celsius recovery plan “will be very attractive” to users and others suggesting that the price of Celsius (CEL) could hit $100. Some firmly believe that Celsius can recover, despite what the cash flow suggests, with one user stating that Celsius is earning $8.5 million monthly from Bitcoin, adding that Celsius will “return stronger.”

With many speculating on the future of Celsius and potential buyers, Reuters reported last week that Ripple Labs is “interested in potentially purchasing assets of bankrupt crypto lender Celsius network.”

Cointelegraph reached out to Ripple Labs to gain evidence on the claims. However, Ripple Labs only confirmed previous reports, noting that the company is “interested in learning about Celsius and its assets and whether any could be relevant to our business.”

While Ripple Labs didn’t disclose if it was going to be purchasing Celsius, the company highlighted the fact that it “has continued to grow exponentially through a market reset and is actively looking for M&A opportunities to scale the company strategically.”

Goldman Sachs is allegedly “considering” assisting an investor in raising the required capital to purchase the digital assets tied up with the struggling lender, according to a June 24 article.

However, a source stressed that Goldman has no intention of owning the digital assets but more so to act on behalf of the investor as the broker.

Celsius Network is bankrupt, so why is CEL price up 4,000% in two months?

Takeover rumors and an ongoing short squeeze help CEL price rally but is there enough momentum for more upside?

Crypto lending platform Celsius Network has an approximately $1.2 billion gap in its balance sheet, with most liabilities owed to its users. In addition, the firm has filed for bankruptcy protection, so its future looks bleak.

Still, Celsius Network’s native utility token CEL has soared in valuation by over 4,100% in the last two months, reaching around $3.93 on Aug. 13 compared to its mid-June bottom of $0.093.

In comparison, top coins Bitcoin (BTC) and Ether (ETH) rallied 40% and 130% in the same period.

Takeover rumors behind CEL explosion?

Technically, the price rally made CEL an excessively valued token in early August when its relative strength index (RSI) crossed above the 70 thresholds.

Takeover rumors appear to be behind CEL’s upside strength. Notably, Ripple wants to purchase Celsius Network’s assets, according to an anonymous source cited by Reuters on Aug. 10.

Reuters reported that Ripple is interested in Celsius assets but there's no confirmation yet from either companies. Celsius has halted withdrawals from the platform since June and has filed for Chapter 11 bankruptcy which will enable them gradually payback what they owe.

— Tajo Crypto (@TajoCrypto) August 10, 2022

CEL’s price more than doubled after the piece of news hit the wire.

In July, rumors also surfaced about Goldman Sachs’ intention to acquire Celsius Network for $2 billion. CEL was changing hands for as low as $0.39 around that time.

CEL price short squeeze

An army of retail traders also appears to be behind the CEL’s giant upside push in the last two months.

Some traders have organized a short squeeze to limit CEL’s downside prospects. A short squeeze is when an asset’s price rises suddenly, forcing short sellers to buy back the asset at a higher price to close their positions.

Bitcoin & Celsius Update

BTC is very choppy so my focus is on altcoins & CEL. I'd like btc to hold 22k for bullish bias. Cel wants breakout again, Iam looking to buy more above 2.6 with #CELShortSqueeze army behind it, could CEL pump to $3 next?

LIKES/RETWEETS APPRECIATED pic.twitter.com/5axZiwcl1Q

— WSB Crypto Mod (@traderrocko) August 12, 2022

It is possible to create a short squeeze because of CEL’s lowering circulating supply, primarily due to the freeze on Celsius Network’s token transfers.

Interestingly, FTX had about 5.1 million CEL tokens on Aug. 13, approximately 90% of all the total circulation across exchanges. Meanwhile, the amount of open short positions on the exchange was around 2.66 million CEL versus the monthly high of 2.96 million CEL on Aug. 11.

*FTX sport short. Source: Legacy Synthesis*

In other words, short traders have closed about 300,000 CEL positions in just two days.

What’s next for Celsius toke?

Short squeezes are hard to sustain over a long period, history shows.

Such prospects put CEL at risks of facing extreme correction in the coming weeks or months. As said, the token is already overbought, which further adds up to the downside outlook.

*CEL/USD three-day price chart. Source: TradingView*

Drawing a Fibonacci retracement graph from $6.50-swing high to $0.39-swing low churns out interim support and resistance levels for CEL. Notably, the token now eyes a breakout above its 0.618 Fib line at around $4.21, with its upside target at $5.25, up 45% from the price on August 13.

Conversely, a break below the support level at the 0.5 Fib line at around $3.48 risks crashing CEL toward $2.75, down 25% from the current price level.