XRP has fallen nearly 18% since hitting a yearly high on December 3, but traders are still hoping for a strong rebound. One cryptocurrency analyst said their optimism could be tested if Bitcoin dominance continues to increase.
“The real risk of the current highly leveraged XRP bull run is that Bitcoin dominance increases again. The swap from XRP to Bitcoin is very likely to lead to mass liquidations.” Pav Hundal, senior analyst at cryptocurrency exchange Swyftx, told Cointelegraph.
The market has developed a ‘thirst’ for XRP long positions.
Bitcoin (BTC) dominance at the time of publication was 55.30%, down 5% from last week, according to TradingView data. Some traders speculate that Bitcoin dominance could peak in the 60-70% range before capital circulates into altcoins.
Bitcoin dominance at the time of publication is 55.27%. source: TradingView
“There has been a lot of rapid buying in retail over the past few weeks, and open interest is currently close to double 2021 levels,” Hundal said.
Hundal added that the market “seems to have developed a thirst for leveraged long-term XRP exposure.”
“We are watching XRP purchases reload as the price decreases,” he said.
XRP (XRP) was trading at $2.37 at the time of publication. A 7% retracement from current prices to $2.18 would result in a loss of $104.4 million on the long position.
XRP was trading around $2.37 at the time of publication. source: TradingView
“It’s starting to look like the market is approaching euphoria territory,” Hundal said.
For most of 2024, XRP traded in a narrow range between $0.48 and $0.73. Things changed after Donald Trump won the US presidential election on November 5, sparking a 431% rally. By December 3, XRP reached $2.85.
On December 5, XRP open interest (OI), a metric that tracks the total number of outstanding Bitcoin derivative contracts, including options and futures, hit $3.44 billion, based on CoinGlass data.
Bitcoin stabilization ‘will calm nerves’
This is nearly $1.44 billion higher than the $2 billion of outstanding XRP recorded in April 2021 during a similar period of price growth.
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The XRP/BTC ratio (XRP relative strength against Bitcoin) is at 0.00002375, up 2.72% since December 5 and up 47.6% over the past 30 days, according to TradingView data.
Hundal said that if Bitcoin stabilizes, “nerves may calm down and spot trading volumes may increase again.”
“Binance’s funding rates are not hot, but on other exchanges they are quite warm. “In the one-year funding ratio heatmap, anything above 50% is generally considered very active,” he said.
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This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.