XRPUSD Soars Amid Volatility, Faces Critical Tests Ahead
XRP has experienced a significant decline of nearly 18% since reaching its yearly high on December 3. Despite this downturn, traders remain optimistic about a potential rebound. However, this optimism could be put to the test if Bitcoin dominance continues to rise, warns a prominent crypto analyst.
According to Pav Hundal, the lead analyst at Swyftx, the real danger for highly leveraged XRP bulls is an increase in Bitcoin dominance. “A rotation from XRP to Bitcoin would very likely lead to a bloodbath of liquidations,” Hundal told Cointelegraph. This scenario poses a significant risk to those holding large long positions in XRP.
Market’s Growing Appetite for XRP Long Positions
As of the time of publication, Bitcoin’s dominance is at 55.30%, down 5% over the past week according to TradingView data. Some traders speculate that Bitcoin dominance could peak in the 60% to 70% range before capital begins rotating into altcoins.
Hundal noted a notable increase in retail buying over the last few weeks, leading to a surge in open interest, which is now close to double the levels seen in 2021. “The market seems to have developed a thirst for leveraged long XRP exposure,” Hundal said. He added, “I’m watching XRP longs being reloaded even as prices shift lower.”
Currently, XRP is trading at $2.37. A retrace of just 7% to $2.178 would result in a wipeout of $104.43 million in long positions. This precarious situation indicates that the market might be approaching a state of euphoria, according to Hundal.
XRP’s Roller Coaster Ride in 2024
For the majority of 2024, XRP traded within a narrow range between $0.48 and $0.73. This changed dramatically following Donald Trump’s presidential victory on November 5, which triggered a staggering 431% rally, pushing XRP to $2.85 by December 3.
On December 5, XRP’s Open Interest (OI)—a metric that tracks the total number of unsettled derivative contracts such as options and futures—reached $3.44 billion, as per CoinGlass data. This was nearly $1.44 billion higher than the $2 billion OI recorded in April 2021 during a similar price rally.
Bitcoin Stability as a Potential Market Soother
The XRP/BTC ratio, which measures XRP’s relative strength compared to Bitcoin, stands at 0.00002375. This ratio has increased by 2.72% since December 5 and surged by 47.58% over the past 30 days, according to TradingView data.
Hundal pointed out that if Bitcoin stabilizes, it could “soothe nerves and spot volumes could pick up again.” He added that while funding rates on Binance are not particularly high, they are “pretty warm” across other exchanges. “Anything over 50% on the one-year funding rate heatmap is generally considered pretty exuberant,” he said.
Proceed with Caution
In conclusion, while there is hope for a strong rebound in XRP, traders should remain cautious of the risks posed by rising Bitcoin dominance. This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
