What short squeeze? Here’s what is really behind XRP’s recent 170% rally

Marcel Pechman

11 hours ago

What short squeeze？ Here‘s what is really behind XRP’s recent 170% rally

These key metrics show there's more to the recent Dogecoin and XRP pumps than just short-seller liquidations.

28246 Total views

72 Total shares

Listen to article

0:00

Market Analysis

Between Jan. 30 and the early hours of Feb. 1, XRP price pumped 147%, reaching $0.76 which is its highest level in two months. The move seems to have been fueled by r/Satoshistreetbets, an off-shoot of r/Wallstreetbets.

It seems that speculative social media group-based investing is becoming a trend so lets take a look at what triggers might have catalyzed the recent surge in XRP price.

XRP Twitter activity vs. Price. Source: TheTie

Data from TheTie, an alternative data provider focused on social analytics, shows just how significant the impact of active Twitter users has been on XRP price.

Even Gene Simmons, the legendary musician from the rock band, KISS, told his nearly 900,000 followers:

“Not recommending any of these to anyone. But yes, I also bought Dogecoin, XRP, and others. Make of it what you will.”Was there short interest behind this move？

Knowing exactly what triggered the investors to crowd into XRP could uncover a set of criteria that may apply to other cryptocurrencies.

Hedge funds with sizeable short positions are what drew investors to GameStop and AMC stock. By coordinating a pump on these companies, buyers knew that would force short sellers to be liquidated and trigger the start of a strong rally.

Taking a look at Bitfinex‘s long-to-short ratio shows that there’s currently $124 million total margin trades combining its USD and BTC based markets. Although that figure is up from $95 million a month ago, its more important to focus on the percentage favoring shorts.

XRP Longs vs. Shorts. Source: Bitfinex

The ratio seen on Jan. 29 favored longs by 180%, and this is the opposite of what‘s necessary for a short squeeze. Moreover, in nominal terms, those $25 million margin shorts were not significant to XRP’s $1.55 billion average daily volume.

On the other hand, futures markets held a $277 million open interest, which is flat from the previous month. But unlike margin markets, buyers and sellers are matched at all times.

XRP aggregate futures open interest. Source: Bybt.com

As depicted above, despite the liquidations caused by the recent 147% rally, XRPs open interest surged in nominal terms due to its price appreciation. To understand whether those traders had been using excess leverage on either side, one should focus on the futures contracts funding rate.

When sellers (shorts) are the ones demanding more leverage, the funding rate goes negative. Therefore, those traders will be the ones paying up the fees.

XRP aggregate futures open interest. Source: Bybt.com

As shown above, buyers had been using more leverage. Albeit relatively steady over the past 30 days, the last time negative funding rates occurred was Dec. 24 and Dec. 29. Both dates mark local lows after substantial price corrections caused by the SEC lawsuit against XRP.

Therefore, it is safe to assume that r/Satoshibets did not pick XRP based on margin shorts nor futures leveraged trades.

Apart from being a sub-$10 coin, XRP was one of the most distant from its all-time high. Its also important to consider that before its recent 1,000% pump, Dogecoin (DOGE) was also trading 90% below its $0.078 all-time high.

Sub-$10 coins. Source: Livecoinwatch.com

While it is indisputable that social investing groups have played some role in the recent rallies seen from Dogecoin, XRP, GameStop and AMC, the data do not validify the narrative that r/Satoshistreetbets chose to pump XRP because of the high level of shorts on the altcoin.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

• #Dogecoin
• #Cryptocurrencies
• #Altcoin
• #Ripple
• #XRP
• #Markets
• #Cryptocurrency Exchange
• #Derivatives
• #Market Analysis

Related News

• Building Empires: Biggest Crypto Exchanges Push for Global Presence

• The name‘s bond, cryptobond: Meet DeFi’s brand-new asset class

• How much is too much？ Crypto art market brings together deep pockets and big artists

• The future of crypto trading will be omni-chain

• 5 factors show bulls control Ethereum price even after a 26% correction

• Altcoins and stocks move higher after Bitcoin price rally to $40,000

Loading

Editor‘s Choice

• CryptoQuant CEO says Coinbase Bitcoin outflows are a ’bullish signal‘
• SEC charges promoters of Steven Seagal-spruiked ICO from 2018
• Price analysis 2/1: BTC, ETH, XRP, DOT, ADA, LINK, LTC, BCH, BNB, XLM
• What short squeeze？ Here’s what is really behind XRPs recent 170% rally
• USDC on exchanges doubled in January while Tether's dominance fell to new lows

Cointelegraph YouTube Subscribe

Advertise with us

Bitcoin BTC/USD

34,055.52 +6.72%

Ethereum ETH/USD

1,398.81 +11.89%

Litecoin LTC/USD

134.80 +15.32%

Ripple XRP/USD

0.37 -35.44%

EOS EOS/USD

3.02 -3.30%