xrp cryptocurrency price

XRP price action imminent? A closer look at the market’s #3 crypto

XRP price action imminent? A closer look at the market’s #3 crypto
Written by publisher team

As the second largest altcoin by market capitalization, XRP is hardly out of place during periods of massive bullish excitement in the cryptocurrency market. Although it is down 85% from its January 2018 high, recent price hikes have sparked significant interest in XRP as investors consider viable diversification of their crypto portfolios.

Any discussion of XRP often includes criticism of Ripple, the blockchain payments company that originally created the XRP token. Moreover, XRP critics argue that Ripple’s ownership of the majority of the token supply, as well as its tendency to dump “coins” into the market, will likely erode any significant value to XRP holders.

As a US-based company, Ripple also struggles with the lack of regulatory clarity in the country. The US Securities and Exchange Commission has not yet determined whether the XRP token is a security, a ruling that could have significant implications for the company.

In the absence of clearly defined regulations, it appears that US-based investors are reluctant to risk significant exposure to XRP. Also, traders who bought more than $1 in 2018 may expect significant selling pressure as they try to recoup their initial investment, and it is likely to keep prices low.

Meanwhile, many countries are working on creating their own digital currencies. Intergovernmental economic and financial institutions continue to make the claim that sovereign digital currencies are better than private cryptocurrencies. With Ripple Marketing XRP as the bridge currency for cross-border remittances, it remains to be seen what the future holds from a utility standpoint for the third-largest cryptocurrency by market capitalization.

XRP has risen twice since November

The price of XRP has more than doubled since the beginning of November on the back of significant tailwinds in the crypto space over this period. The influx of institutional funds into Bitcoin (BTC) has led to bullish developments that have also translated into a renewed interest in the altcoin market as well.

XRP is currently at its highest price since September 2018 as the popular altcoin breached multi-year resistance, opening up the possibility of an equivalent advance at least in the short term. In fact, XRP reached the $0.9 level on Coinbase as retail interest peaked in late November.

However, the sudden rise to $0.92 was followed by a sharper drop of 45%, with XRP hovering between the $0.50 and $0.60 price ranges since then. According to crypto analyst and Cointelegraph contributor Michael van de Poppe, if the price of XRP remains above the support level at $0.45, an attack on the $1 price mark is unlikely, especially amid the tailwinds from pushing another Bitcoin towards a new all-time high.

The last major cryptocurrency rally, which took place between late 2017 and early 2018, saw altcoins gain big even after bitcoin’s decline began. However, the price correction of the likes of ETH (ETH), XRP, Litecoin (LTC) and other altcoins were slightly above BTC.

In fact, the average drop in the altcoin space was 90% during the 2018 bear market period. Thus, while Bitcoin is below 10% of ATH, altcoins like XRP are still trailing their price records by a large margin, usually between 60% and 90%.

XRP Looks to Move Toward the $1 Price Tag

As for XRP, the price’s path to the upside appears to be hinged on two important stages: the psychological $1 level and the A$3.82 level. At present, there are quite a few driving forces that can fuel the move towards and over the log.

However, a sustained advance in the parabola that would push XRP north of the ATH seems unlikely, at least in the short term. Konstantin Anisimov, CEO of cryptocurrency exchange CEX.io, told Cointelegraph, “From a technical perspective, the call for new all-time highs for XRP right now seems far fetched.”

According to Anissimov, the November breakout of XRP led to the formation of a bullish flag pattern on price action. Flag patterns usually point to areas of tight price consolidation, and XRP is currently within a lower range of the $0.60 level. He explained:

“If the buying pressure behind this cryptocurrency continues to escalate, another breakout in the same direction as the previous trend may occur. In fact, the bullish flag pattern predicts that XRP could rise by more than 65%. An upward impulse could lead this altcoin to surpass $1.00. .”

The upcoming Flare Network airdrop is also likely to provide an incentive to continue buying XRP. On December 12, the multiple exchanges that support airdrops will take a snapshot of their clients’ XRP balances as the basis for distributing Spark (FLR) tokens. FLR is the original token of the Flare Network, a project developed by Ripple to bring “Ethereum-like” capabilities to the XRP ledger. The project, which is said to be compatible with Ethereum smart contracts, is expected to start work before the end of the second quarter of 2020.

With Ripple excluded from Airdrop, crypto enthusiasts may be more inclined to increase their holdings of XRP or become first-time token owners in order to receive airdrops. The DeFi craze in Q3 2020 showed just how valuable some airdropped tokens can become, especially for projects that succeed in making major impacts on the network.

For Mostafa El Meshita, Executive Vice President of Global Digital Assets for a crypto-focused commercial bank, dropping the upcoming FLR is enough to provide a bullish boost to XRP. In a conversation with Cointelegraph, the CEO identified $0.93 as the short-term price tag for XRP on the back of the Airdrop shot.

Potential institutional interest, coin burns, token waste

Bitcoin enjoyed significant institutional interest in 2020, with Wall Street firms and popular investors alike buying BTC’s value proposition. Reports are also emerging of investors taking a broader look at the crypto market outside of bitcoin. Michael Sonnenchin, Managing Director of Grayscale, recently revealed that there is a growing class of “Ethereum only” investors. The advent of the DeFi market in 2020 appears to improve the attractiveness of Ethereum among institutional players.

Related: Game recognition game: Institutions make it easier to invest in Bitcoin

With XRP being the third coin by market capitalization, the token may be ripe for institutional payment as well. In its 2020 shareholder letter, financial risk management firm FRMO Corp. identified XRP as “one of the most… [crypto]currencies,” adding:

“If the speed of XRP transactions increases significantly, the number of coin units will drop dramatically, thus creating a significant return even if the coin itself does not see an increase in market capitalization. However, you will see an increase in value per unit.”

Perhaps it is important to note that the FRMO analysis is based on a massive increase in the XRP instrument, which could lead to significantly higher transaction fee payments. According to the XRP tokenomics model, transaction fees are burned, which in themselves are small fractional units of the token. On the contrary, this amount is paid to miners and network auditors for mined cryptocurrencies.

In theory, the increased interest of XRP means a significant increase in the total amount collected as fees. As this amount is inevitably destroyed, the circulating supply of XRP will begin to constantly decrease, creating a situation where the demand for the token will outpace the available coins. This massive drop can be accelerated by the XRP community voting for Ripple to burn all their XRP token holdings. Earlier in December, Ripple chief technical officer David Schwartz hinted at such a possibility, adding that the company would not be able to stop the move.

Ripple has long been accused of diluting the supply of XRP through ongoing token sales, with critics saying the company has completely slipped from the value held by coin holders. Aside from Ripple’s actions, XRP is also suffering from downward selling pressure from ex-Ripple co-founder Jed McCaleb, who routinely sells his stock of tokens.

As part of McCaleb’s steep departure from the company in 2014, the former Ripple technical director was awarded a settlement of 9 billion XRP for his role in founding the company. The only condition associated with the deal is that McCaleb cannot dispose of the entire amount at once.

With XRP seeing a significant increase in retail trading activity, the regulatory uncertainty surrounding Ripple and the token itself still means that market interest is not translating into actual interest in the coin, at least in the US. Earlier in December, Ripple CEO Brad Garlinghouse claimed that about 95% of the company’s customers are overseas.

According to Garlinghouse, the perceived limited adoption of XRP in the US comes from a lack of regulatory clarity from the Securities and Exchange Commission about the token’s status as a fiat or currency. Indeed, in October, Ripple revealed plans to exit the United States, with Japan and Singapore proposed as potential candidates for resettlement. While Garlinghouse remains frustrated with the “regulation by enforcement” policies of US agencies, he has since noted that the company will wait and see what changes the Biden administration will implement.