The XRP price rose 40% in the past 24 hours and saw a 52% increase at the high point of the day. Behind the surprising rally was a big short pressure that resulted in massive volatility within a few hours.
It is evident that given the speed of the rally, the upswing was driven by brief pressure on the futures exchanges.
It took about four hours for XRP to go from $ 0.2536 to $ 0.3120. Since then, it has retreated to around $ 0.3550 on major exchanges, including Binance.
What started the big XRP short squeeze?
On December 23, when the entire market corrected, XRP recorded the highest number of liquidations, outperforming Bitcoin (BTC) and Ether (ETH).
Liquidations occur on the futures market when the price of the asset has a large price movement and a long (buy) or short (sell) position is overfunded.
For example, if a trader uses 10x leverage, they can trade an amount that is ten times higher than the share capital. However, if the price of the asset moves 10% from the position, the position will be liquidated and worthless.
In the case of XRP, there was long pressure after the US Securities and Exchange Commission filed a complaint against Ripple and two of its executives.
An excessive short sale of XRP followed as the price of XRP fell to just $ 0.2138. However, with the market volatile towards shorts, there was brief pressure on December 25th.
As a result, the XRP price soared within four hours. In the past 24 hours, data from Bybt.com has shown that XRP futures contracts worth $ 73.5 million have been liquidated.
Some technical analysts predicted an XRP short squeeze and noted the trend towards excessive shorting. A pseudonymous analyst named “Crypto ISO” said:
“XRP is likely to go up. Is it wise to short circuit something after such a big drop when the news has already been released? I’m not sure what the cops case really is and wouldn’t touch it, but neither would I try to milk much more in the short term. In that case, Coinbase’s delisting could be the final hit. “
XRP continues to face the risk of being delisted from US exchanges
Analysts remain divided over the short to medium term future of XRP. Some say even if XRP is considered a security in the US, it is used globally, and as such, the fall of the SEC alone would not mark the end of XRP.
A pseudonymous trader called “Credible Crypto” said that XRP is not a security in Singapore, Japan and some other countries. He wrote:
“90% of Ripples customers are not in the US. 90 +% of the trading volume of $ XRP is done on exchanges outside of the US. $ XRP is NOT a security in Singapore, UK, Switzerland and Japan. If you think the SEC case is sending $ XRP to $ 0, you may not be thinking objectively. $ XRP is global. “
However, the lawsuit will likely still have a significant impact on the token, given that Ripple is a US-based company and the XRP supply is managed by American citizens. Hence, Neko, a cryptocurrency investor, said this was still a big problem. He explained:
“This applies to the volume. But they also forget that the management of $ XRP are US citizens, as is the company. If the SEC sees this as collateral, then exchanges that interact with U.S. clients will need to be delisted. I wouldn’t say it’s a 0, but it’s still a big problem. “