Bearish Sentiment Dominates XRP as Short Positions Surge

23 June 2024

in XRP

Reading Time: 3 mins read

Santiment shows that a large number of short positions have been entered against XRP and ADA, with analysts predicting a bearish market for both veteran cryptocurrencies.
However, some point out that if the price of XRP rises, all the shorts would be liquidated, propelling the price of the token even higher.

XRP has shed 8.3% in the past month, hitting a one-year low just above $0.46. This has led to bearish sentiments among traders, with data showing that traders have increasingly taken short positions against the token, but some analysts believe this could fuel a comeback for the world’s seventh-largest crypto.

At press time, XRP changed hands at $0.4854, trading in a tight range for the past week, where it set a weekly high at $0.5183 on Monday before dipping hours later. The trading volume suffered the cyclical weekend dip to hit $391 million, half the volume from the day prior.

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Year-to-date, XRP has lost over 20% of its value, the worst performance in the top ten cryptos by market cap. For comparison, Bitcoin and Ethereum have gained just over 50% in that time, while BNB has almost doubled despite Binance’s legal woes a few months back. The only other major coins that have fared worse are Cardano’s ADA and Avalanche’s AVAX.

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This performance has been mirrored in the derivatives market, where traders have piled on short positions against both ADA and XRP, according to Santiment. The crypto market intelligence platform stated:

Cardano and XRP are a couple of the most notable altcoins that are seeing heavy traders shorting following relief bounces. This is a good sign for patient bulls, as liquidates shorts can effectively act as ‘rocket fuel’ for continued price rises.

As shown below, traders have placed big bets that both tokens will continue to dip. However, if either token shakes the bears off and makes even moderate gains, most of the short positions will be wrecked, and this could provide them with the “rocket fuel” they need to embark on a bull rally.

Despite the bearish sentiments on the derivatives market, long-term holders remain confident in XRP’s future. As one analyst points out, the token has formed a triangular trading pattern similar to the pattern that preceded the incredible bull rally of 2017. Prior to 2017, the triangular pattern had been narrowing for three years, and when the token finally breached the upper trendline, it shot to a new record high.

As shown below, XRP has been stuck in a similar wedge since, and it’s edging towards a culmination in the near future. As Crypto News Flash has reported previously, the pattern aligns with the period in which most legal experts expect the SEC ruling to be made. A positive ruling for Ripple could provide the fuel needed to break past the upper trendline, pushing XRP to new highs.