Ripple (XRP) gained 72% from Aug. 7-14, but since then any attempt to break out of the descending channel has been quickly put to an end. The past ten days have been no different, with XRP price revised by 15%.
The platform was first introduced in 2012 and Ripple is an open source distributed protocol and money transfer system developed by the US-based Ripple Labs. The company offers cross-border payment solutions through domestic partnerships or by offering RippleNet services.
At one point, the price of XRP was trading above $ 2, but the multi-year lawsuit between Ripple and the US Securities and Exchange Commission was one of the factors that continued to put pressure on the price and appetite of investors.
The lawsuit began in December 2020 when the SEC alleged that CEO Brad Garlinghouse and co-founder Chris Larsen had made a “continuous, unregistered offering of securities for digital assets” with the sale of their XRP token.
As a result, XRP struggled on many of the leading crypto exchanges in the United States, including Binance.US, Coinbase, and Bitstamp.
The latest pump in early September could have been because the Japanese financial group SBI Holdings is planning to set up a crypto fund. Tomoya Asakura, director and senior executive of SBI, said the company could see the fund grow to several hundred million dollars.
SBI Holdings owns a 60% joint venture with Ripple called SBI Ripple Asia, which provides RippleNet technology to financial institutions and remittance service operators in Japan, South Korea and some eastern countries. In addition, Ripple owns 33% of Money Tap, a Japanese payments network operated by SBI and 38 other banks.
Professional traders are neutral to the XRP price
To understand the position of the whales and the arbitrage table, one should analyze the quarterly futures premium (base rate). In the case of fixed-month contracts, the imbalance in demand is ultimately reflected in the price difference to the regular spot market.
Healthy derivatives markets should have a premium of 5 to 15% as traders charge more money to move trades. A low or negative fundamental ratio is a bearish indicator and signals that investors are uncomfortable with taking long positions with leverage.
Notice how the December futures premium at Binance peaked over 5% on September 6th as traders were overwhelmed by the possible breakout of $ 1.40. This premium is equivalent to 17% per year and signals excessive leverage on the part of the buyer (buyer).
The recent XRP price correction has dampened market expectations and the current price gap of 1.9% over a 3-month period equates to 7.8% per year, a neutral indicator.
Retailers confirm neutral stance
On the other hand, the preferred derivative of retailers is the perpetual futures contract, as its price often perfectly replicates the regular spot markets. There is also no need to manually transfer expiring contracts, as is the case with quarterly futures.
In any futures contract, a long (buyer) and a short (seller) trade are always merged, but their leverage is different. As a result, the exchanges charge whichever side uses more leverage to offset their risk and this fee is paid to the counterparty.
Neutral markets typically have a positive funding rate of 0% – 0.03% or 0.6% per week, which suggests that the long-term perspective is paying off.
The data shows that the exciting phase of long leverage lasted from August 8th to September 7th, with the average 8 hour fee peaking at 0.10%. This equates to 2.1% per week, which is not sustainable in the longer term.
Both the retail and perpetual-oriented quarterly contracts of professional traders show no signs of a bear market, which should be interpreted as positive in view of the 15% negative performance in the last ten days.
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