Ripple (XRP) Faces Selling Pressure Amid Market Uncertainty
Ripple (XRP) is experiencing increased selling pressure as the weekend approaches. The cryptocurrency is currently trading around $2.80 on Friday. An intraday recovery attempt faltered below a short-term resistance level at $2.90, leading to a brief dip towards the $2.80 support level.
Market participants are closely monitoring key economic data from the United States for insights into the Federal Reserve’s monetary policy direction. The upcoming Federal Open Market Committee (FOMC) meeting on September 17 is expected to bring a decision on interest rates.
Risk assets, such as cryptocurrencies and stocks, could benefit from the first rate cut of the year. However, traders should prepare for volatility and price fluctuations in the coming days as they manage risk.
Decline in Retail Demand for XRP
Retail demand for XRP has significantly decreased in recent weeks. This is evidenced by the drop in futures Open Interest (OI) to $7.4 billion after reaching a peak of $10.94 billion on July 22.
A persistent decline in OI, which tracks the notional value of outstanding futures contracts, suggests a lack of conviction in XRP’s ability to sustain a short-term recovery. With fewer traders participating in the market, the path of least resistance may remain downward, increasing the likelihood of XRP testing the $2.70 support level.
Despite this, a positive futures weighted funding rate of 0.0083% indicates that more traders are increasingly leveraging long positions in XRP. If the funding rate increases in the coming days, risk sentiment could strengthen XRP, allowing it to maintain a recovery above the psychological level of $3.00.
Technical Outlook: XRP Could Extend Its Decline
XRP’s price is testing the $2.80 support level after recovering some intraday gains on Friday. This reflects risk-averse sentiment during the American session. The Relative Strength Index (RSI) at 46 and trending downward towards the oversold region indicates a fading bullish momentum as bears take control.
The sideways movement in the Moving Average Convergence Divergence (MACD) indicator around the zero line suggests a struggle between bulls and bears. If the blue MACD line confirms a sell signal by falling below the red signal line, the decline could accelerate to test the $2.70 support level.
However, if bulls regain control, supported by investors buying the dip with the $2.80 support holding, a breakout above the 50-period EMA at $2.84 on the 4-hour chart could signal the beginning of an aggressive bullish push above the crucial $3.00 level.
Cryptocurrency Metrics – Frequently Asked Questions
Here are some frequently asked questions about cryptocurrency metrics:
What determines the total number of tokens for a cryptocurrency?
The developer or creator of each cryptocurrency decides the total number of tokens that can be minted or issued. Only a certain number of these assets can be minted through mining, staking, or other mechanisms. This is defined by the algorithm of the underlying blockchain technology. Since its creation, a total of 19,445,656 BTC have been minted, which is the circulating supply of Bitcoin. On the other hand, the circulating supply can also decrease through actions such as token burning or mistakenly sending assets to addresses of other incompatible blockchains.
How is market capitalization calculated?
Market capitalization is the result of multiplying the circulating supply of a particular asset by its current market value. In the case of Bitcoin, the market capitalization in early August 2023 exceeds $570 billion, which is the result of the more than 19 million BTC in circulation multiplied by the price of Bitcoin, which is around $29,600.
What is trading volume?
Trading volume refers to the total number of tokens of a specific asset that have been traded or exchanged between buyers and sellers within a set trading schedule, for example, 24 hours. Used to measure market sentiment, this metric combines all volumes from centralized and decentralized exchanges. Increased trading volume often denotes demand for a particular asset, as more people are buying and selling the cryptocurrency.
What is the funding rate?
The funding rate is a concept designed to encourage traders to take positions and ensure that perpetual contract prices match those of spot markets. It defines a mechanism for exchanges to ensure that future prices and periodic price payments converge regularly. When the funding rate is positive, the price of the perpetual contract is higher than the market price. This means that traders who are bullish and have opened long positions pay traders who are in short positions. Conversely, a negative funding rate means that perpetual contract prices are lower than the reference price, so traders with short positions pay traders who have opened long positions.
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