XRP has become one of the hottest assets in the cryptocurrency market in recent days. This was aided by the attention of traders from Reddit, who previously squeezed short positions on GameStop stocks. On Saturday, XRP rallied 60% and surpassed $ 0.50 for the first time since December 22. This was the largest single day gain for XRP since December 21, 2017.
A group gathered in Telegram, numbering at the time of preparation of the material already over 180,000 members. A day earlier, there were 62,000 of them. Very soon, she may run into the Telegram limit of 200,000 participants in one group. In this regard, its administrators launched a channel to which such restrictions do not apply. Their goal is to “pump and hold XRP” in order to turn with the token what happened to GameStop during this week. The main part of the action is scheduled for February 1 at 16:30 Moscow time.
“Focus on XRP. Buy and hold, ”writes one of them.
Pump and Dump
Pump and dump schemes are nothing new in themselves, and they have gained particular popularity in the unregulated cryptocurrency market. Nevertheless, events around XRP are of interest due to the fact that after the start of the SEC proceedings with Ripple, the token has a large number of holders of unprofitable positions, and the publicity due to the participation of traders from Reddit, who have already successfully organized short squeezing in the stock market.
“It pains me to talk about this, but it looks like the wave of money that raised DOGE started to move into XRP. XRP is up 50% on the day thanks to amazing fundamentals. Just like GameStop, ”says analyst Luc Martin.
Despite the scale of the planned pump, a number of analysts doubt that XRP will be able to repeat what the Dogecoin meme did this week, the rate of which rose 1,000% over the course of a day.
“Buying XRP at current prices when its future hangs in the balance is pure gambling,” trader Glen Goodman told Forbes. “The crowd with WallStreetBets can easily run it much higher, but once they lose interest and switch to another target, the price will surely crash again.”
“I don’t expect the XRP pump to be as big as the Dogecoin pump this week. XRP is harder to move as its market cap is significantly higher than Dogecoin, but I assume they can push it up to $ 0.75-1, ”analyst Alex Kruger wrote.
Kruger also noted that, unlike GameStop, there were no hedge funds in the Dogecoin market that would hold a large volume of short positions, so the late participants, in whose wallets a significant amount of the depreciated cryptocurrency, remains the main victims of such events.
“How many ‘investors’ in Doge stock realize they’ve been led by one of the biggest pump and dump schemes in history?” Kruger added.
It is likely that at least one major XRP holder will be grateful to the traders on Telegram if they provide him with exit liquidity to get rid of the troubled asset. Whale Alert yesterday fixed a 400 million XRP ($ 185 million) transaction sent from an unknown wallet to the Coinbase exchange. And although Coinbase stopped supporting XRP amid the SEC’s lawsuit against Ripple, moving such a large amount of assets may indicate that their owner has his own plan.
How XRP will behave
The possible direction of the market can be indicated by the funding rates for futures. At time of publication, they are 0.1% for XRP, the largest of any leading crypto asset, indicating an oversupply of margin-long positions. Thus, instead of squeezing short positions caused by directed actions by retail investors, in this case, we can see a squeeze of long positions with an accompanying collapse in the rate if large XRP holders decide to play against mass expectations.
In technical analysis, there is a special definition for such situations – “falling knife”. “Don’t try to catch the falling knife,” traders urge each other, implying that no one should buy a rapidly depreciating asset in an attempt to catch a bottom until it is actually found.
A “falling knife” can be replaced by a sharp rebound, but this is not always the case. In any case, such an increase in market volatility makes it possible to open successful positions, if, for example, buy at the low of a downtrend or open a short position at the highs, remembering to close it before the recovery begins. The risks in this case are high and correspond to the potential profit, but before receiving it, the trader may be forced to incur significant losses.
One way or another, market participants are advised to refrain from spontaneous actions and try to get additional confirmation before taking anything. One such confirmation could be the formation of a stable uptrend, as reflected by the Relative Strength Index (RSI) or the MACD indicator. There is no need to talk about confirmations using fundamental factors in the XRP scenario, since the first meeting in the SEC case against Ripple is scheduled for the end of February, and this will only be a pre-trial hearing.
This, however, is only one of the possible developments. Trader CryptoKaleo cites the following chart to support his view that XRP will rise:
In case you’ve forgotten how this works, this is what happens when Ripple breaks out of the green accumulation zone.
It makes vertical moves. It was never available on Coinbase during any of those, and it’s always had plenty of FUD.
I won’t watch from the sidelines pic.twitter.com/MW7BWH7yCg
— K A L E O (@CryptoKaleo) January 31, 2021
“If you’ve forgotten how it works, here’s what happens when Ripple breaks out of the green accumulation zone,” the trader writes. – He makes vertical movements. At such stages, it was never available on Coinbase and was always surrounded by panic. I will not wait on the sidelines. But do not hesitate to play against me, anon. And these movements do not depend on any particular pump and dump group. ”
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