Could XRP shorting activity act as a catalyst for a powerful rally
Amidst the recent turbulence and sell-offs in the cryptocurrency market, XRP Ledger (XRP), backed by Ripple Labs, is making efforts to regain its bullish momentum.
Santiment, an on-chain analytics platform, has identified a factor that could contribute to further price increases for XRP. Despite the recent declines in the crypto market, heavy shorting activity against XRP could paradoxically act as “rocket fuel” for a price rise.
Santiment revealed that XRP, along with Cardano (ADA), is among the most heavily shorted altcoins following their relief bounces. This heavy shorting is seen as a positive sign for patient bulls, as the liquidation of these short positions could provide the necessary momentum for XRP to rise higher.
The current market indicators show that the Binance Funding Rate for XRP indicates a bearish market sentiment with a prevalence of short positions. Traders holding short positions are paying those with long positions, suggesting expectations of a price decline. Additionally, the long/short ratio slightly tilts towards more short positions, reinforcing the bearish outlook.
Furthermore, the one-week liquidation heat map reveals significant leverage concentration around the $0.50664 price level. Strong support zones are identified between $0.48 and $0.50, while resistance is noted near $0.52. Movements beyond these levels could trigger significant liquidations.
Recent data from CryptoQuant highlights a significant increase in Open Interest (OI) for XRP. Rising open interest usually indicates that more investors are opening positions with the expectation of price increases. This leads to higher liquidity, benefiting traders by providing tighter bid-ask spreads and reducing slippage, ultimately enhancing overall market efficiency.
According to Santiment’s data, XRP’s 30-day MVRV (Market Value to Realized Value) suggests a mildly bullish sentiment. The negative MVRV indicates that investors are, on average, holding losses, which often precedes a price recovery. XRP has recently seen a modest gain and is currently trading at $0.4932.
Market analysts are optimistic, with analyst Cryptobilbuwoo noting a correlation between XRP’s price and altcoin dominance. His analysis suggests that XRP could surge to $2.71, indicating a potential rebound. Developments like Ripple’s ongoing SEC lawsuit and Ethereum Virtual Machine compatibility on the XRP Ledger could also influence its long-term valuation.
Currently, XRP is trading at $0.49 with a slight decrease over the past 24 hours. Despite this decline, the setup suggests a potential bullish reversal. The significant shorting activity and high liquidation leverage create a scenario where a short squeeze could lead to an explosive price rally. Monitoring key support and resistance levels will be crucial for traders.
In conclusion, any positive news or shifts in market sentiment could result in a short squeeze and an explosive price rally for XRP.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative, and your capital is at risk.