- Ripple's XRP exchange reserve decline and open interest growth reveal strong bullish sentiment among investors.
- XRP's estimated leverage ratio shows investors are taking high leverage risk, and a correction often ensues when the ratio peaks.
- XRP could rally to $1.96 if it validates the rounded bottom pattern.
Ripple's XRP trades at $1.11 on Wednesday, maintaining its position as the best-performing cryptocurrency in the top 20 cryptos by market capitalization, with over a 50% rise in the past week. On-chain data and technical patterns show that the remittance-based token could continue the uptrend and rally to $1.96 as bullish sentiment remains dominant.
XRP's on-chain data indicates dominant bullish momentum
In the past seven days, investors withdrew nearly 250 million XRP tokens from Korean exchange Upbit, which holds the largest XRP reserve, per CryptoQuant's data. The withdrawals have sent Upbit's XRP reserve to a four-month low of 6.3 billion XRP, as revealed in the chart below. A similar trend is also seen in Binance's XRP reserve, which began trending downwards after hitting a peak on November 12.
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XRP Exchange Reserve - Upbit | CryptoQuant
A decrease in an asset's exchange reserve indicates rising buying pressure, which may boost prices.
The dominant bullish sentiment is also visible in XRP's futures open interest, which surged to an all-time high of $1.98 billion on Sunday before settling around $1.84 billion in the early Asian session on Wednesday, per Coinglass data
XRP Open Interest | Coinglass
Open interest is the total number of outstanding contracts in a derivatives market.
Additionaly, XRP's estimated leverage ratio (ELR) shows that investors expect the uptrend to continue. The ratio has been trending upwards, reaching 0.17 earlier on Saturday — its highest level since January. However, investors should be cautious as a sharp price correction often follows when the ELR hits high levels.
XRP Estimated Leverage Ratio | CryptoQuant
ELR shows how much leverage traders use and is obtained by dividing an exchange's open interest by their coins reserve. Increasing values indicate most investors are taking high-leverage risk in the derivatives market.
Ripple technical analysis: XRP could see another spike if rounded bottom pattern is validated
Ripple's XRP trades above the $1.10 level after seeing $9.62 million in futures liquidations. Liquidated long and short positions accounted for $6.23 million and $3.38 million, respectively.
On the weekly chart, XRP is on the verge of validating a rounded bottom pattern following over a 100% surge in the past two weeks.
XRP/USDT weekly chart
If XRP sustains an extended move above its three-year resistance of $1.35, it will validate the pattern and potentially rally to test the resistance at $1.96.
A move above this resistance will send XRP into the $2 range for the first time in six years.
The Relative Strength Index (RSI) is in the oversold region, indicating a price correction may occur. Meanwhile, the Awesome Oscillator (AO) has posted consecutive green bars above its neutral level, signaling rising bullish momentum.
A daily candlestick close below $0.74 will invalidate the bullish thesis and potentially send XRP to $0.38.
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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