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A crypto analyst says that the market “could be approaching euphoria territory” with the significant amount of XRP longs “being reloaded” as the price retraces.
Markets News
XRP has fallen nearly 18% since hitting its yearly high on Dec. 3, but traders are still holding out hope for a strong rebound. That optimism, however, could be tested if Bitcoin dominance continues to climb, warns a crypto analyst.
“The real danger right now for highly leveraged XRP bulls is that Bitcoin dominance increases again. A rotation from XRP to Bitcoin would very likely lead to a bloodbath of liquidations,” crypto exchange Swyftx lead analyst Pav Hundal told Cointelegraph.
Markets have developed a ‘thirst’ for XRP long positions
At the time of publication, Bitcoin (BTC) dominance is 55.30%, down 5% over the past week, as per TradingView data. Some traders speculate that Bitcoin dominance could peak in the 60% to 70% range before the rotation of capital into altcoins begins.
Bitcoin dominance is 55.27% at the time of publication. Source: TradingView
“We’ve seen a lot of quick twitch buying by retail over the last few weeks, and open interest is now close to double the levels we saw in 2021,” Hundal said.
Hundal explained that the market seems to have “developed a thirst for leveraged long XRP exposure.”
“I’m watching XRP longs being reloaded even as prices shift lower,” he added.
XRP (XRP) is trading at $2.37 at the time of publication. Even a 7% retrace from its current price to $2.178 will wipe out $104.43 million in long positions.
XRP is trading at approximately $2.37 at the time of publication. Source: TradingView
Hundal said, “It’s starting to look like the market could be approaching euphoria territory.”
For most of 2024, XRP traded in a narrow range between $0.48 and $0.73. That changed after Donald Trump’s presidential win on Nov. 5, triggering a 431% rally. By Dec. 3, XRP reached $2.85.
On Dec. 5, XRP Open Interest (OI) — a metric tracking the total number of unsettled Bitcoin derivative contracts such as options and futures — clocked $3.44 billion, per CoinGlass data.
Bitcoin stabilizing will ‘sooth nerves’
It was nearly $1.44 billion higher than the $2 billion open interest XRP recorded in April 2021 during a similar price rally.
Related: RIP altseason? XRP price tumbles 13% despite Bitcoin’s $100K surge
The XRP/BTC ratio — XRP relative strength compared to Bitcoin — is 0.00002375, up 2.72% since Dec. 5 and up 47.58% over the past 30 days, as per TradingView data.
Hundal said if Bitcoin stabilizes, it “could soothe nerves and spot volumes could pick up again.”
“The funding rates on Binance are not hot, but across other exchanges, they are pretty warm. Anything over 50% on the one-year funding rate heatmap is generally considered pretty exuberant,” he said.
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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.
This article first appeared at Cointelegraph.com News
