XRP Price Consolidates as Investor Confidence Wavers
Ripple’s XRP has been trading sideways for over a week, hovering around $2.33 on Tuesday. The cross-border remittance token had previously surged to $2.65 on May 12, fueled by Bitcoin’s rally towards new all-time highs. However, this upward momentum stalled, leaving XRP vulnerable to potential losses due to profit-taking and a lack of conviction in reaching the $3.00 target. A persistent decline in network activity since January and December suggests waning investor confidence, potentially hindering XRP’s ability to break out.
XRP Ledger Active Addresses Plunge 44% as Confidence Dwindles
The extended consolidation in XRP’s price indicates shifts in key fundamentals, including user engagement with the blockchain protocol. CryptoQuant’s Active Addresses metric reveals a significant 44% drop, from 39,515 to 22,253 addresses.
This metric historically correlates positively with XRP’s price. A sustained decrease in active addresses often negatively impacts the token, potentially leading to price declines.
The on-chain Active Addresses metric tracks the number of addresses or users transacting on the XRP Ledger, whether sending or receiving XRP.
Data from CoinGlass further reveals a lack of conviction in the micro-environment, with XRP futures Open Interest (OI) falling from a recent peak of $5.52 billion on May 14 to $4.77 billion at the time of writing.
OI represents the total number of active futures contracts that have yet to be settled or closed. The decline in OI suggests traders are closing positions amid shifting market dynamics, resulting in low activity and increasing the likelihood of a prolonged bearish trend.
A subsequent surge in trading volume, with liquidations of long positions rising to $3.19 million compared to nearly $500,000 in shorts, indicates a growing bearish sentiment.
As XRP’s price trades sideways within a narrow range of $2.27 to $2.34, traders should temper their expectations until the next breakout is confirmed.
Technical Outlook: Can XRP Bulls Stabilize the Uptrend?
XRP’s price currently sits slightly above the short-term support provided by the 50-day Exponential Moving Average (EMA) at approximately $2.30. Just below this level, the 100-day EMA reinforces support at $2.27.
Despite the strong support, a confirmed sell signal from the Moving Average Convergence Divergence (MACD) indicator on May 20 could encourage traders to sell XRP. This signal occurs when the MACD’s blue line crosses above the red signal line.
Simultaneously, the Money Flow Index (MFI), a momentum indicator measuring the flow of money into and out of XRP, is declining. The drop from near overbought conditions at 76 on May 14 supports the bearish outlook.
A price movement below the 50-day EMA and the 100-day EMA could signal increased selling pressure. Key areas of interest for traders looking to buy the dip include the 200-day EMA at $2.06 and the April 7 low at $1.61.
However, the SuperTrend indicator displays a buy signal, suggesting that bulls still have the upper hand and could resolve the current indecision to the upside. The SuperTrend is a trend-following volatility indicator that sends a buy signal when the price crosses above it, changing color from red to green. As long as it follows XRP’s price, the probability of a bullish breakout remains high.
Key levels and milestones to monitor for progress towards the $3.00 target include a break above the descending trendline and the supply zone at $2.80, which was tested as resistance in February and December.
SEC vs. Ripple Lawsuit: Key Takeaways
According to a court ruling issued on July 14, the classification of XRP as a security depends on the transaction:
- For institutional investors or over-the-counter (OTC) sales, XRP is considered a security.
- For retail investors who purchased the token through programmatic sales on exchanges, on-demand liquidity services, and other platforms, XRP is not classified as a security.
The Securities and Exchange Commission (SEC) accused Ripple and its executives of raising over $1.3 billion through an unregistered asset offering of the XRP token.
While the judge ruled that programmatic sales are not considered securities, sales of XRP tokens to institutional investors are considered investment contracts. In the latter case, Ripple violated U.S. securities law and will continue to litigate over the approximately $729 million it received under written contracts.
The ruling offers a partial victory for both Ripple and the SEC, depending on the perspective.
Ripple achieves a significant win as programmatic sales are not considered securities, which could bode well for the broader cryptocurrency sector, as most assets targeted by the SEC are managed by decentralized entities that primarily sold their tokens to retail investors through exchange platforms, according to experts.
However, the ruling does not significantly clarify what constitutes a digital asset as a security, leaving uncertainty as to whether this lawsuit will set a precedent for other open cases involving dozens of digital assets. Issues such as the appropriate level of decentralization to avoid the “security” label and the demarcation between institutional and programmatic sales are likely to persist.
The SEC has intensified its enforcement actions towards the blockchain and digital asset sector, filing charges against platforms like Coinbase and Binance for alleged violations of U.S. securities law. The SEC asserts that most crypto assets are securities and are therefore subject to strict regulation.
While defendants may use parts of the Ripple ruling to their advantage, the SEC may also find reasons to maintain its current strategy of regulation through enforcement.
The court decision is a partial summary judgment. The ruling can be appealed once a final judgment is issued or if the judge permits it beforehand. The case is in a pre-trial phase, where both Ripple and the SEC still have the possibility of reaching a settlement.
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