- XRP downside risks persist amid subdued sentiment in the broader cryptocurrency market.
- XRP futures open interest and trading volume decline, while long position liquidations prevail.
- The SuperTrend indicator’s buy signal suggests that selling pressure could be easing, potentially setting the stage for a near-term rebound.
Ripple’s (XRP) bulls are struggling to limit downside risks while the broader cryptocurrency market consolidates. The cross-border money transfer token is hovering at around $2.18 after extending losses by 4% from its recent lower high at $2.25. Fundamentals from the derivatives market suggest that overhead pressure could continue to overshadow demand, especially with the Open Interest (OI) and trading volume falling sharply.
XRP risks extending losses as open interest and volume drop
The XRP derivatives market exhibits signs of a potentially prolonged downtrend, primarily due to a decline in open interest (OI) and trading volume. According to CoinGlass data, OI declined by almost 3% to $3.91 billion over the past 24 hours. This drop coincides with a larger 14% plunge in trading volume to $3.53 billion, signaling a decline in trader interest in XRP and low market participation.
XRP derivatives market data | CoinGlass
The price drop, coupled with the falling OI, could continue to fuel liquidations. Long position traders currently bear the biggest brunt of the changing market dynamics, with $4.45 million in value wiped out, compared to approximately $294,000 in shorts. If XRP upholds the downtrend in upcoming sessions, the long-to-short ratio at 0.9275 could continue to favor sellers, reducing the probability of a trend reversal.
Technical outlook: What’s next as XRP losses surge
XRP hovers under key moving averages such as the 4-hour 200-period Exponential Moving Average (EMA) currently at $2.27, the 100-period EMA at $2.25 and the 50-period EMA at $2.22. This, alongside a sell signal from the Moving Average Convergence Divergence (MACD) indicator, underscores the overhead pressure.
The blue MACD line recently crossed below the red signal line, validating the sell signal and likely encouraging traders to reduce exposure to XRP. Furthermore, the expanding red histogram bars below the mean line (0.00) increase downside risks.
Based on the Money Flow Index (MFI), which tracks the amount of money flowing into and out of XRP, there is a higher probability that declines could extend to test support at $2.07.
XRP/USDT 4-hour chart
Despite the bearish outlook, the SuperTrend indicator suggests a potential near-term trend reversal after flashing a buy signal in the same 4-hour timeframe. The trend-following tool serves as dynamic support and resistance by utilizing the Average True Range (ATR) to measure market volatility. Traders often consider buying when the price crosses above the SuperTrend line, changing color from red to green.
A reversal cannot be ruled out at the momentum, which means that the 50-period EMA at $2.22, the 100-period EMA at $2.25 and the 200-period EMA at $2.27 are key areas of interest to traders betting on a potential rebound.
SEC vs Ripple lawsuit FAQs
It depends on the transaction, according to a court ruling released on July 14, 2023:
For institutional investors or over-the-counter sales, XRP is a security.
For retail investors who bought the token via programmatic sales on exchanges, on-demand liquidity services and other platforms, XRP is not a security.
The United States Securities & Exchange Commission (SEC) accused Ripple and its executives of raising more than $1.3 billion through an unregistered asset offering of the XRP token.
While the judge ruled that programmatic sales aren’t considered securities, sales of XRP tokens to institutional investors are indeed investment contracts. In this last case, Ripple did breach the US securities law and had to pay a $125 million civil fine.
The ruling offers a partial win for both Ripple and the SEC, depending on what one looks at.
Ripple gets a big win over the fact that programmatic sales aren’t considered securities, and this could bode well for the broader crypto sector as most of the assets eyed by the SEC’s crackdown are handled by decentralized entities that sold their tokens mostly to retail investors via exchange platforms, experts say.
Still, the ruling doesn’t help much to answer the key question of what makes a digital asset a security, so it isn’t clear yet if this lawsuit will set precedent for other open cases that affect dozens of digital assets. Topics such as which is the right degree of decentralization to avoid the “security” label or where to draw the line between institutional and programmatic sales persist.
The SEC has stepped up its enforcement actions toward the blockchain and digital assets industry, filing charges against platforms such as Coinbase or Binance for allegedly violating the US Securities law. The SEC claims that the majority of crypto assets are securities and thus subject to strict regulation.
While defendants can use parts of Ripple’s ruling in their favor, the SEC can also find reasons in it to keep its current strategy of regulation by enforcement.
