Bitcoin
Here’s Why Ripple (XRP) Won’t Fall Any Further
Ripple (XRP) ran to more than $3.20 a piece during the weekend just gone and, in doing so, recorded an all-time market capitalization high above $125 billion. This coin has been one of the standout performers from the last three months and it’s probably fair to say that, outside of bitcoin, it’s the coin that’s garnered the highest degree of mainstream speculative attention – that is, capital entering the space to speculate on XRP that otherwise hasn’t been allocated to cryptocurrency historically.
XRP Daily Chart
Right now, however, and as priced on CoinMarketCap, Ripple goes for around $1.92 a piece. At that price, the coin’s market capitalization comes in at just shy of $75 billion – 40% off highs, with the 40% decline coming on the back of just a few days of trading.
News media is calling time on what it refers to as the XRP bubble and skeptics are rushing to support this opinion.
There’s one part of the story, however, that nobody seems to be talking about. If they were, the current decline would be far more contained that it is and sentiment surrounding the wider cryptocurrency markets – and especially Ripple – would be far more buoyant than it is right now.
So what is everyone missing?
A few days ago, and basically without any pre-announcement, the above mentioned CoinMarketCap dropped all three of the major South Korean cryptocurrency exchanges from its price calculations.
Why is this important?
It’s a well-known fact within this sector that the SK exchanges consistently price the assets they offer at a 30% (approximate) premium to the rest of the world. Be it rooted in demand, optimism, high fees, regulation, whatever, this is a fact.
With many coins, this isn’t too much of a big deal. The vast majority of bitcoin volume is transferred across Japanese exchanges. This is true also of coins like Ethereum (which also has high volume in Europe) and Litecoin.
With Ripple, however, a large (dominant) portion of the XRP that’s traded is traded across SK exchanges. This means that the 30% premium impacts price considerably, as measured on a global scale.
So when CoinMarketCap took this volume out of the equation, a circa 30% dip would be expected pretty much instantly, given the website’s dominance in this space as things stand.
But that’s not all.
As noted, XRP is down more than 40% off highs, so some reading might be asking the question – why the extra 10% plus decline?
The answer is rooted in sentiment.
When the price of an asset starts to fall, people who own that asset start to sell out in an attempt to limit losses. This selling results in further decline and has a sort of snowball effect on price. The further price falls, the more people sell and the more price falls, and on and on.
On and on, that is, until common sense returns to the markets and people start to realize what’s going on and – in turn – start buying the asset in anticipation of price bottoming out and an eventual return to the upside.
We think XRP is at that point right now.
A 40% decline is substantial in anyone’s books and, when considered against the fact that nothing is driving the decline outside of a calculation alteration and a subsequent sentiment slide, it’s tough to see things dipping beyond current levels.
And when things start to turn around, they are going to turn around fast.
That’s why we like XRP at current prices more than perhaps any other coin in the market. It’s taken an amplified (and unjustifiable) impact on the SK listing alteration and, in turn, it should see an amplified recovery once markets regain some sense.
We will be updating our subscribers as soon as we know more. For the latest on XRP, sign up below!
Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.
Image courtesy of Ripple.
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