Crypto: XRP Facing Major Risk!

The recent euphoria surrounding XRP could quickly turn into disillusionment for optimistic investors. As the price of the cryptocurrency has dropped by 18% from its annual high, an expert warns of a possible “bloodbath” if Bitcoin’s dominance were to increase in the market.

A euphoric crypto market despite the decline

On December 3rd, the XRP reached its highest level of the year at $2.85, boosted by a spectacular bullish movement following Donald Trump’s electoral victory.

The enthusiasm of investors does not seem to wane despite the ongoing correction, as evidenced by the record open interest of $3.44 billion recorded on December 5th on XRP derivative contracts. This level far exceeds the previous record of $2 billion observed in April 2021, signaling a possible “euphoria” in the market according to Hundal.

The situation becomes particularly concerning with the multiplication of long leveraged positions, even as the price continues to fall. “We have seen many rapid purchases from retailers in recent weeks“, highlights the Swyftx analyst, pointing out the potential danger of such accumulation.

The specter of a rotation towards Bitcoin

The dominance of Bitcoin in the crypto market, currently at 55.30%, represents a growing threat to XRP holders. Industry experts foresee a possible increase in this dominance up to 60-70%, which could trigger a massive movement of capital from altcoins to bitcoin.

This potential rotation is particularly concerning due to the levels of leverage currently used on XRP. A simple decrease of 7% from the current price, bringing it down to $2.18, would be enough to trigger the liquidation of long positions amounting to $104.4 million.

High funding rates on several exchange platforms, exceeding 50% on the annual heat map, confirm the “exuberant” nature of the current market. Only a stabilization of Bitcoin could, according to Hundal, “calm the nerves” of investors and allow for a healthy recovery of spot volumes.