XRP rebounded 72% from Aug. 7-14, but since then all attempts to break out of the descending channel have been quickly foiled. The past ten days have been no different, with XRP price revised by 15%.
First introduced in 2012 by the US-based Ripple Labs, Ripple is an open source distributed protocol and money transfer system. The company offers cross-border payment solutions through domestic partnerships or by offering RippleNet services.
There was a time when the price of XRP was trading above $ 2, but the year-long litigation between Ripple and the US Securities and Exchange Commission was one of the factors causing sustained downward pressure on both sides of the coin.
The lawsuit dates back to December 2020 when the SEC accused CEO Brad Garlinghouse and co-founder Chris Larsen of “selling unregistered digital securities” through their XRP.
As a result, XRP was delisted on many of the top exchanges in the United States such as Binance.US, Coinbase, and Bitstamp.
XRP / USD Price Chart | Source: TradingView
The recent surge in early September could be attributed to a plan to set up a cryptocurrency fund from Japanese financial giant SBI Holdings. Tomoya Asakura, director and senior manager of SBI, said the fund could grow to hundreds of millions of dollars.
SBI Holdings owns 60% of the joint venture SBI Ripple Asia with Ripple and provides RippleNet technology to financial institutions and remittance service operators in Japan, South Korea and certain Southeast Asian countries. Ripple also 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, quarterly futures premiums should be analyzed. In the case of fixed-month contracts, the unbalanced demand is reflected in the price difference to the regular spot market.
XRP futures spread December (above) vs. XRP / USDT (below) | Source: TradingView
Healthy derivatives markets have a 5 to 15% spread as traders charge more money to defer payments. A low or negative spread is a bearish indicator and signals an investor’s discomfort with taking long positions with leverage.
Note that the December futures premium on Binance peaked over 5% on September 6th as traders hoped for a possible breakout of $ 1.40. This spread is 17% per year and signals excessive leverage on the long (buyer) side.
The recent correction in the XRP price 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 also confirm their neutral stance
On the other hand, the retailer’s preferred derivative is the perpetual futures contract, as its price is often similar to that of the regular spot market. With this type, you do not have to manually transfer expiring contracts, as is required with quarterly futures.
Long (buyer) and short (seller) trades are constantly being executed in every futures contract, but their leverage is different. As a result, the exchanges will calculate which side uses more leverage from the funding rate to offset the risk, and that fee is paid to the other party.
Neutral markets typically have a positive funding rate of 0% – 0.03% or 0.6% per week, which shows that long positions are paying off.
Funding rate 8 hours for XRP Perpetual Futures | Source: Bybt.com
The data shows that the excitement for leveraged long positions from 08.08. until July 9th lasted, with the average 8 hour charge being 0.1%. This corresponds to 2.1% per week, but is not sustainable in the long term.
In summary, it can be said that neither the retail-oriented perpetuals nor the quarterly contracts of professional traders show any signs of bear market and should be interpreted as positive in view of the 15% decline in performance in the last 10 days.
Join Bitcoin Magazine Telegram to keep track of news and comment on this article: https://t.me/coincunews
According to Cointelegraph