- XRP open interest surged by 40% in the past 24 hours.
- Buying pressure across exchanges and investment products helped XRP to maintain a bullish outlook.
- XRP could be on the verge of a massive breakout after testing the resistance of a bullish pennant.
Ripple’s XRP trades near $2.40, up 1% on Monday following a 40% surge in its futures open interest. The surge could help the remittance-based token overcome the key resistance of a bullish pennant pattern.
XRP on-chain activity indicates rising bullish momentum after open interest surge
XRP futures open interest witnessed a spike on Monday, rising by over 40% from 1.09 billion XRP to 1.53 billion XRP. Open interest is the total number of unsettled contracts in a derivatives market.
XRP Open Interest. Source: Coinglass
The recent spike in open interest amid flat prices indicates the inflow of new liquidity to fuel XRP’s bullish bias, especially with Donald Trump’s upcoming inauguration on January 20. However, prices sometimes tend to move in the opposite direction when bullish expectations are very high.
XRP exchange net flows also indicate a slight bullish bias in the past week, thanks to higher buying pressure from Binance, OKX and Bybit investors, which posted combined net outflows of $91.81 million. However, US-based investors were bearish, as indicated by the net inflow of $76.53 million into Coinbase.
XRP Exchange Flows. Source: Coinglass
Meanwhile, XRP investment products recorded positive flows last week, as it was the only major crypto asset without a negative flow. The products posted $5.7 million in net inflows, the highest across all digital assets investment products, per CoinShares data.
Inflows in crypto ETFs/investment products represent buying activity, and vice versa for outflows. However, in crypto exchange flows, inflows represent selling activity and vice versa for outflows.
XRP could post a massive rally with a break above bullish pennant resistance
XRP saw $3 million in futures liquidations in the past 24 hours, with long and short liquidated positions accounting for $1.72 million and $1.28 million, respectively, per Coinglass data.
XRP is on the verge of validating a bullish pennant after testing the pattern’s upper boundary resistance for the second time in the past three days. If XRP posts a high volume move above this resistance, it could rally to a new all-time high near $4.78.
XRP/USDT daily chart
However, it could encounter key hurdles at its all-time high of $3.55 and near the resistance below the $3.00 psychological level.
If XRP continues seeing a rejection at the upper boundary of the pennant, it could find support at its lower boundary near the 50-day Simple Moving Average (SMA).
The Relative Strength Index (RSI) momentum indicator is above its neutral level, signaling dominant bullish momentum. Meanwhile, the Stochastic Oscillator (Stoch) is slightly in the overbought region, indicating XRP may see a moderate correction.
A daily candlestick close below $1.96 will invalidate the bullish thesis and send XRP toward $1.35.
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.
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