Bitcoin recovery disappears from Celsius liquidation, but how long will it last?

After a brutal week full of crashes, the price of Bitcoin has recovered significantly above $20,000. These dips have pushed decentralized finance (DeF)/lending protocol Celsius to the brink of liquidation. However, as the price recovered, the platform was once again able to hold out for longer, as its liquidation point is now a little further away. Questions remain, whether the recovery will last and whether Celsius will be able to avoid liquidation.

Liquidation price falls

With Bitcoin over $20,000, Celsius’ liquidation price is now a bit far off. However, that did not change the sentiment around the loan agreement, which has now suspended withdrawals for seven days. Its liquidation price remains steady at $14,000, but the company has assured the community that it will continue to work to correct these issues.

Celsius first announced a freeze on transfers and exits last Monday, citing volatile market conditions as the reason behind the move. Even with the recent recovery, lending protocols are still at risk of liquidation, so withdrawals and transfers remain frozen.

Related reading | Bitcoin funding rates remain negative, but open interest tells another story

In a recent communiqué with the public, Celsius said it was working with officials to find a suitable solution. “Since the company’s inception, we have prioritized maintaining an open dialogue with regulators and officials,” Say Celsius. “We plan to continue working with regulators and officials on this suspension and our company’s determination to find a solution.”

However, if history is any guide, investors are unlikely to withdraw their funds. Especially given the collapse of Three Arrows Capital (3AC), speculation in this space remains largely in the camp of eventual bankruptcy.

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

Will Bitcoin Continue Its Recovery?

Bitcoin’s current trajectory points to more recovery, but only if it’s a legitimate recovery and not a bull trap. This would basically see the price test the $21,000 resistance level before the end of the session.

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

That said, the digital asset price remains below its 20-day moving average. While this can often point to a buying opportunity, it can also signal an investor’s reluctance to put money into the market at the prices of the past two weeks.

Market sentiment was also in extreme fear, suggesting investors were more cautious. If sentiment shifts along with price, the market could see more buying pressure, which could lead to a continuation of the uptrend.

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

Featured image from Vulcan Post, chart from TradingView.com

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