Here’s the reason behind the surprise Ripple (XRP) rally!
The price of Ripple (XRP) has risen 40 per cent in the past 24 hours, recording a 52 per cent gain at the top of the day. Behind the astonishing rally was a huge “short squeeze” that caused a huge surge within hours. According to Joseph Young in CoinTelegraph, it is clear that the rise is due to the short squeeze experienced in futures exchanges due to the pace of the rise.
It took about 4 hours for XRP to rise from $ 0.2536 to $ 0.3120. It has since returned about $ 0.3550 on major exchanges, including Binance.
What triggered the big XRP short squeeze?
On December 23, when the entire market recovered, XRP saw the highest amount of liquidity, surpassing both Bitcoin (BTC) and Ethereum (ETH). Liquidity in the futures market occurs when the asset processes a long (buy) or a short (sell) position with excessive leverage when it sees a large price movement.
For example, if a trader uses 10 times leverage, he can make a transaction 10 times larger than the base capital. But if the price of the asset moves by 10 percent against the position, the position is liquidated and becomes worthless.
In the case of XRP, there was a “long squeeze” after the U.S. Securities and Exchange Commission filed a complaint against Ripple and his two executives.
The price of XRP fell as much as $ 0.2138. But there was a short squeeze on December 25 as the market turned sharply towards short positions.
As a result, the price of XRP has seen a rapid increase in the last 6 hours. Bybt data in the last 24 hours shows that $ 73.5 million of XRP futures contracts have been liquidated.
Some technical analysts have identified the extreme short position trend by predicting a short squeeze on XRP. An analyst known as “Crypto ISO” said:
“XRP IS PROBABLY RISING. AFTER SUCH A BIG DROP, WITH THE NEWS ALREADY APPEARING, DOES IT MAKE SENSE TO SHORT THE XRP? I’M NOT SURE WHAT THE BULL SITUATION REALLY IS AND WHETHER IT WILL GET ON THAT TRAIN BUT I ALSO WOULDN’T TRY TO SHORT IT ANY MORE FOR A SHORT TIME. COINBASE’S DELIST OF THE TOKEN COULD BE THE FINAL BLOW.”
Ripple at risk of being delisted by US stock markets
Analysts are divided over the short-to medium-term future of XRP. Some say that XRP is used globally even if it is considered a securities in the US, and so the SEC’s lawsuit alone will not mean the end of XRP.
A trader known as “creditable Crypto” said XRP is not a securities in Singapore, Japan and various countries:
“90 PERCENT OF RIPPLE’S CUSTOMERS ARE NOT IN THE UNITED STATES. 90 PERCENT OF XRP TRADING VOLUME OCCURS ON EXCHANGES OUTSIDE THE UNITED STATES. XRP IS NOT A SECURITIES IN SINGAPORE, THE UK, SWITZERLAND AND JAPAN. IF YOU THINK THE SEC LAWSUIT SENT XRP TO $ 0, YOU MIGHT BE THINKING BIASED. XRP IS GLOBAL.”
However, since Ripple is a US-based company and the supply of XRP is managed by American citizens, the lawsuit will likely have a major impact on the token, according to Cointelegraph. Therefore, ” Neko”, a cryptocurrency investor, said that this situation is still a big problem:
“THE VOLUME THING IS CORRECT. BUT YOU ALSO FORGET THAT XRP HAS US CITIZENS IN CHARGE, AND THE COMPANY IS ALSO BASED IN THE US. EXCHANGES THAT INTERACT WITH U.S. CUSTOMERS WILL BE REQUIRED TO DELIST XRP IF THE SEC ACCEPTS XRP AS A SECURITIES. I DON’T KNOW ABOUT $ 0, BUT IT’S STILL A BIG PROBLEM.”