The price of XRP has climbed 40% in the past 24 hours, registering a gain of 52% to the day’s high. Behind the surprising rally there was a big short push which caused massive volatility within hours.
It is evident that the upsurge was driven by short pressure on the futures markets due to the speed of the rally.
It took about four hours for XRP to go from $ 0.2536 to $ 0.3120. Since then, it has returned to around $ 0.3550 on major exchanges, including Binance.
What triggered the XRP big short squeeze?
On December 23, when the overall market corrected, XRP recorded the highest number of liquidations, outperforming both Bitcoin (BTC) and Ether (ETH).
Closeouts occur in the futures market when the price of the asset sees a significant price movement and a long (buy) or short (sell) position is over-leveraged.
For example, if a trader uses 10x leverage, a trader can trade an amount 10 times the base capital. But if the asset’s price moves relative to the 10% position, the position is liquidated and becomes worthless.
In the case of XRP, there was long pressure after the United States Securities and Exchange Commission filed a lawsuit against Ripple and two of its executives.
Excessive shorting of XRP followed as the price of XRP fell to $ 0.2138. But as the market shifted sharply to shorts, a short squeeze occurred on December 25.
Therefore, the price of XRP saw a rapid increase in four hours. In the past 24 hours, data from Bybt.com shows that $ 73.5 million in XRP futures have been liquidated.
Some technical analysts predicted an XRP short squeeze, spotting the tendency for excessive shorting. A pseudonymous analyst known as “Crypto ISO” said:
“XRP is probably going up. Is it safe to bypass something after such a big drop with the news already released? I don’t know what the bull box really is and I wouldn’t touch it, but I wouldn’t try to milk a lot more on a short film, either. The withdrawal from Coinbase could be a final failure if that happens. “
XRP still at risk of being delisted by US exchanges
Analysts remain divided on the short to medium term future of XRP. Some say that even though XRP is considered a security in the United States, it is used around the world and as such the SEC case alone would not mean the end of XRP.
A pseudonymous trader known as “Credible Crypto” has stated that XRP is not a security in Singapore, Japan and certain other jurisdictions. he wrote:
“90% of Ripples customers are not in the United States. Over 90% of the $ XRP trading volume occurs on exchanges outside of the United States. $ XRP is NOT a security in Singapore, UK, Switzerland and Japan. If you think the SEC case is sending $ XRP to $ 0, you might not be thinking objectively. $ XRP is global. “
However, the lawsuit will likely still have a major impact on the token, since Ripple is a US-based company and the supply of XRP is handled by US citizens. Therefore, “Neko,” a cryptocurrency investor, said it was still a big deal. he declared:
“It’s true for the volume. But you also forget that the managers of $ XRP are US citizens just like the company. If the SEC sees it as security, exchanges that interact with U.S. clients will have to pull out. I wouldn’t say it’s a 0, but it’s still a big deal. “