Bitcoin Recovery Steps Away From Celsius Selloff, But For How Long?

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Bitcoin price made a remarkable recovery above $20,000 after a brutal week riddled with crashes. These declines had driven decentralized finance (DeF)/Celsius lending protocol to the brink of liquidation. However, as the price has rallied, the platform is once again able to hold out longer as its liquidation point is now a little further away. It remains to be seen whether the recovery will hold and whether Celsius will be able to avoid the sell-off.

Clearance price pushed back

With the bitcoin price above $20,000, Celsius’ liquidation price is now a bit off. This, however, has not changed the sentiment around the loan protocol, which has now suspended withdrawals for 7 days at this point. Its liquidation price still remains firmly at $14,000, but the company assured the community that it continues to work to resolve the issues.

Celsius first announced the freeze on transfers and withdrawals last Monday, citing unstable market conditions as the reason for the move. Even with the recent takeover, the loan protocol remains under threat of liquidation, and as such, withdrawals and transfers remain frozen.

Related Reading | Bitcoin Funding Rates Remain Negative But Open Interest Tells A Different Story

In his latest statement to the public, Celsius said he was working with officials to find an appropriate resolution to his issues. “As has been a priority since the inception of our business, we maintain an open dialogue with regulators and officials,” said Celsius. “We plan to continue to work with regulators and officials regarding this pause and our company’s determination to find a solution.”

However, based on history, investors are highly unlikely to be able to withdraw their funds. Speculation in the space remains largely in the eventual bankruptcy camp, especially given the Three Arrows Capital (3AC) debacle.

BTC recovers above $20,000 | Source: BTCUSD on TradingView.com

Will Bitcoin continue to recover?

Bitcoin’s current trajectory points to a bigger rally ahead, but that’s only if it turns out to be a legitimate rally and not a bull trap. This would essentially see the price test the resistance level of $21,000 before the end of the trading day.

Related Reading | Don’t Expect Bitcoin Recovery Anytime Soon, Galaxy Digital CEO

That said, the digital asset price is still trading below its 20-day moving average. While this can often indicate a buying opportunity, it can also show that investors are unwilling to put money into the market at the prices they have had for the past couple of weeks.

Market sentiment is also extremely scared, indicating even greater distrust among investors. If sentiment were to reverse with price, then the market could see more buying pressure, which could see the uptrend continue.

Bitcoin is trading at $20,731 at the time of this writing. It remains the largest cryptocurrency in the world with a market capitalization of $396 billion.

Featured image from Vulcan Post, chart from TradingView.com

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