Cryptocurrency Exchange Runs Risky Business

This year’s bear market has been marked by many devastating blows. With the UST Depeg and subsequent Luna crash, a Celsius Network bank-run resulting in paused withdrawals which forced a Chapter 11 restructure, and other lending platforms Voyager & BlockFi – all suffering devastating financial losses to loyal customers, many ask the question, why did this happen?  Could these injustices have been prevented? 

Crypto News desks will have you believe it was the macro downturn & high inflation, while others scream ponzi or poor management decisions, but what if a more sinister plan was in play, lurking in the shadows and wreaking havoc on crypto communities. 

What if the Crypto Industry has its very own Villain? A person or institution that has motive and ample money to influence the Luna Crash and trigger the subsequent domino effect into the various lending platforms noted above. The events of the last few months leave little doubt that this contagion effect cost crypto investors millions in realized losses. Hardest hit were the smaller investors with less institutional protections.

With two sides of the trade always in play, when someone is losing, someone is winning. The question is, who?

Sources in the cryptosphere point to many Bad Actors who intend to profit from the decline of these Crypto platforms, effectively lowering their value to either remove them as competitors or seemingly swoop in to save the day by convincing communities affected with either funding or court-appointed, liquidation saving buyouts. It’s safe to say these would-be saviors are not the Angel Investors they would have you believe.

The names are familiar, with many early indications pointing at Cory Klippsten, Max Keiser & Mike Alfred or as they are satirically referred to as “The 3 Amigos”, who all are primed to profit with Celsius Network seemingly damaged and their sizeable Customer base and valuable assets up for grabs.

While recent events have set the stage for Crypto Industry giant such as Sam Bankman-Fried (SBF) of FTX to potentially profit significantly from a liquidation order on Celsius Network which could result in its infrastructure being absorbed into Alameda Family.

With FTX, “tightening the noose” around crypto with its dramatic expansion, it may seem plausible that, SBF sets to benefit dramatically with a successful takeover and acquiring these attractive crypto infrastructure platforms in a fire sale.

Hard evidence has been difficult to prove to date, sources familiar with the matter, indicate a more sinister situation is at hand.

If we primarily focus our attention on Celsius Network.

Slightly prior to the pause of withdrawals on June 12th 2022, 10M CEL token short positions were open on FTX:CELUSD. Notably prior to this, a well-timed and relentless smear campaign was deployed, which precipitated the now famous “bank run” event where $1.5B was hastily drained out of Celsius by depositors.

During the past 9 weeks, the FTX Global Lending for $CEL have ranged from 10m to 2m, with an accompanying range of $15M-45M USD registered as buy orders for $0.01 on the FTX International Order Book

During this time, a grassroots movement, trending on Twitter with #CelShortSqueeze led by Celsius token holders, decided to fight back after realizing 93.37% of supply was locked for the foreseeable future, raising it from a low of $0.08 to a high of $4.63.

Twitter profiles called for holders to remove $CEL from all exchanges into self-custody and set high limit orders on popular Cryptocurrency DeFi aggregator, 1inch for prices $100 and above. With Forbes, CoinDesk and CoinTelegraph all covering the movement.

Aimed at liquidating short sellers to extract wealth from collateral used to secure lending, back into the hands of users who are long $CEL, it is evident that while millions in short positions were liquidated and/or closed, the golden goose remained untouched, highlighting a conceivable scenario. 

The Short Position is much larger than visible on FTX Exchange.

One prevailing theory was, the primary short seller is likely an institution who suffered destructive losses from the Luna fallout and has a formidable link with Alameda. This may explain the unlimited capital deployed to suppress price, motivated by the need to recover their losses.

However, leaked information from a source wishing to remain anonymous within FTX Global, indicates the exchange has made an OTC deal by “loaning” millions in $CEL token to a third party. These loans were then masked by the institution via multiple OTC sales to other exchanges, therefore sold back into the total available supply.

In spite of this, two factors possibly not considered when opening this position, was the reported, 93% of token supply being locked on the platform under a legal court order and investors stepping in to take advantage, clearly seeking payback for the inherited damage to their investment portfolios.

Recent trading activity indicates the situation is desperate, with heavy trading sessions from the bears to artificially suppress the price from reaching $5.00 USD and above, by dumping hundreds of millions on the exchange to beat down the community fuelled appreciating cryptocurrency.

At time of publication, there are 2M Short positions listed on FTX:CELUSD. One only needs to question, why spend hundreds of millions in dollar terms to defend such a position? Signs now point to the scenario leaked above. With enormous amounts of capital and the willingness to pay exorbitant lending fees all for what appears to be a vendetta to destroy the CEL token’s market value and therefore, Celsius Network.

This could be interpreted as a strong indication that a margin call or forced liquidations may be imminent if CEL token moves north of $5.00 USD. If that CEL has been lent out and then sold to other exchanges, that loan will need to be recalled at very near prices, soaring CEL token to moon math heights, with some community members memeing prices at $420 USD and higher.

With millions in CEL ‘off-market Short Positions, this is theoretically possible if the majority of holders list their $CEL for sale at these levels and higher.

This forces FTX to make a decision. Protect the “Crypto Villain” hiding in the shadows, by taking on the liability which could potentially deteriorate the platform into insolvency. Or margin call this loan(s), forcibly recalling back millions, potentially billions of dollars in collateral back to affected communities, therefore transferring the wealth from the bad actors as “exit liquidity” into Celsius, Luna & Voyager Communities. There is a certain sense of poetic justice with this potential outcome aimed to fight market manipulation at its core.

Finally, the recent departure of Sam Trabucco, the now former co-CEO of crypto trading firm Alameda Research, things may not be what they seem behind the scenes.

Passionate investors may get their wish. One can imagine the destruction to traders who are, “caught short” triggered by an increasing price in the digital asset, especially if vengeful investors dedicated to fighting injustices and market manipulation have their say.

Current supply is being monitored via API through a community powered dashboard below. Include up to 10M or more tokens off-market, this makes for interesting viewing.https://legacysynthesis.com/cel/ 

To quote one online user, 

“This will be the most historic short squeeze in Crypto history”.

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