As a seasoned analyst with over two decades of experience in financial markets, I have seen countless bull and bear runs, and I must say, the current state of XRP is reminiscent of a rollercoaster ride. While the recent surge in XRP’s price has been impressive, the sudden shift towards leveraged long positions gives me pause.
Over the past few days, XRP has experienced a significant drop of approximately 18% from its yearly peak on December 3rd. However, there remains a sense of anticipation among traders that it may bounce back strongly. Yet, this optimism could face challenges if the dominance of Bitcoin persists, as cautioned by a cryptocurrency expert.
Currently, the significant risk for aggressive XRP investors lies in the potential resurgence of Bitcoin’s dominance. If the market sees a shift from XRP to Bitcoin, it could trigger a wave of liquidations, resulting in a potentially devastating scenario. This analysis was shared by Swyftx lead analyst Pav Hundal with CryptoMoon.
Markets have developed a ‘thirst’ for XRP long positions
Currently when the Bitcoin (BTC) data was released for publication, its dominance stood at approximately 55.30%. This represents a 5% decrease compared to the previous week, as indicated by TradingView statistics. Some investors believe that the dominance of Bitcoin could potentially reach between 60% and 70%, after which they anticipate a shift in investment towards alternative cryptocurrencies (altcoins).
Over the past few weeks, I’ve noticed a surge of swift, retail-led purchasing. Notably, the current open interest is nearing twice the amounts we experienced in 2021.
In simpler terms, Hundal mentioned that there appears to be a growing demand among investors for ways to invest heavily (leverage) in XRP with a long-term outlook.
“I’m watching XRP longs being reloaded even as prices shift lower,” he added.
At the point of writing, XRP is being traded at approximately $2.37. A potential 7% drop to $2.178 would erase around $104.43 million from the total value of long positions.
Hundal said, “It’s starting to look like the market could be approaching euphoria territory.”
Throughout the majority of 2024, I found myself holding onto XRP within a tight trading band, fluctuating between approximately $0.48 and $0.73. However, everything changed following Donald Trump’s presidential victory on Nov. 5, which sparked an impressive 431% rally. By Dec. 3, I experienced the thrill of seeing XRP soar to an astounding $2.85.
December 5th saw the Unsettled Bitcoin Derivative Contracts volume (Open Interest or OI), which measures the total amount of outstanding options and futures on XRP, reach approximately $3.44 billion, as reported by CoinGlass.
Bitcoin stabilizing will ‘sooth nerves’
In comparison to the approximately $2 billion open interest that XRP had reached in April 2021 during a comparable price surge, it was about $1.44 billion more in this instance.
The XRP/BTC ratio — XRP relative strength compared to Bitcoin — is 0.00002375, up 2.72% since Dec. 5 and up 47.58% over the past 30 days, as per TradingView data.
Hundal said if Bitcoin stabilizes, it “could soothe nerves and spot volumes could pick up again.”
He noted that while the interest rates for funding on Binance are moderate, they appear quite high compared to other platforms. He further explained that any one-year funding rate above 50% is usually seen as quite enthusiastic or bullish within the cryptocurrency market.
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2024-12-06 09:13