Ripple Price Analysis - Transactions active addresses flag
Ripple (XRP) is a payment protocol and network token which aims to compete with the banking protocol SWIFT. The crypto asset is currently down 94% from the all-time high established in January 2018. The XRP market cap stands at US$9.6 billion based on a 43.28 billion XRP circulating supply, with US$331 million in trade volume over the past 24 hours.
XRP was created in November 2012 by three founders; Arthur Britto, Chris Larsen, and Jed McCaleb, in collaboration with Ryan Fugger who began working on a payments protocol in 2004 called RipplePay. The project, which was close source at that time, was incorporated under a new name, NewCoin, in September 2012. NewCoin rebranded to OpenCoin in October 2012 and then rebranded again, to Ripple Labs, in September 2013.
McCaleb resigned in May 2013, officially leaving the project in July 2013, and went on to create Stellar (XLM) in July 2014. McCaleb previously founded the MT GOX exchange, in 2010, which was sold to Mark Karpeles in March 2011.
McCaleb received a reported 5.3 billion XRP at the time of leaving Ripple, which he can sell restricted amounts of, based on a 2016 settlement that set yearly limits. On September 7th, he received a further 100 million XRP.
Since 2015, Brad Garlinghouse has served as the Ripple Labs CEO, with David Schwartz serving as CTO since July 2018. Schwartz joined Ripple Labs in 2011 as chief cryptographer. Over the past year, there have been several new hires in Ripple Labs upper management.
- In January, Stuart Alderoty, who had previously worked at CIT Bank, HSBC, and American Express, joined Ripple as general counsel.
- In February, Cory Johnson, previously Chief Market Strategist, was removed from the Ripple website, with Ripple stating that "due to changes in market conditions, we've chosen to eliminate the role."
- In May, Breanne Madigan, former Goldman Sachs executive and former head of institutional sales and strategy at Blockchain.com become the head of global institutional markets at Ripple.
- In July, former head of Ripple Institutional Liquidity, Catherine Coley, was announced as the CEO of BAM Trading Services, the operator of Binance’s upcoming U.S. crypto exchange.
- In September, Ron Hammond, who also helped craft the Token Taxonomy Act, was announced as the new Manager of Government Relations.
- In October, Craig Phillips, who had previously held leadership roles at Morgan Stanley and BlackRock, joined the Ripple board of directors. Phillips also most recently served as Counselor to the United States Secretary of the Treasury, Steven Mnuchin.
Initially, 100 billion XRP were minted by the founders, with 80% of that supply held by the currently branded Ripple Labs, which is also known as “Ripple.” In May 2015, the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) determined that Ripple Labs was the “administrator” of the XRP tokens and levied the company with a fine of US$700,000 for failing to register as a money service business.
The gorilla in the room for Ripple continues to be whether or not the XRP token represents an unregistered security. Ripple initially created, escrows, owns a majority of, and continues to control the majority flow of tokens. Ripple argues that the network is decentralized, the token does not represent shares of Ripple, and that the network would continue to exist if Ripple Labs did not. Several pending court cases, as well as any comments from the U.S. Securities and Exchange Commission (SEC), will clear any regulatory uncertainty surrounding the asset.
In the most recent motion to dismiss an active case, the Ripple legal team argues that the plaintiff did not purchase tokens during the initial offering and did not purchase any from the defendants either. The motion states, “purchasing XRP is not an ‘investment’ in Ripple; there is no common enterprise between Ripple and XRP purchasers; there was no promise that Ripple would help generate profits for XRP holders; and the XRP Ledger is decentralized.”
In December 2017, Ripple announced a programmatic escrow system for the 55 billion XRP held by the company at that time. One billion XRP are unlocked from escrow and offered for sale each month. Any unsold XRP is then placed back in escrow at the end of the month.
Ripple’s Q3 2019 report revealed 0.7 billion of the three billion XRP released from escrow over the quarter had been purchased on the open market, down from 0.9 billion sold in the previous quarter. Ripple’s Q2 report revealed that Ripple would be “substantially reducing future (programmatic) sales of XRP”, which are down to nearly 10% of the previous quarter.
The top 100 largest XRP accounts, excluding the 50.2 billion XRP currently in held escrow, hold 74.58% of the total circulating supply. Ripple holds a further 6.6 billion XRP, leaving 43.16 billion XRP in circulation.
For consensus, the XRP network uses The Ripple Protocol Consensus Algorithm, which aggregates collectively-trusted subnetworks of nodes and validators. There are currently 975 public nodes with 6.5% running the most recent software, version 1.4.0. The network also has 145 active validators, 93% of which have an anonymous domain, with non-Ripple validators accounting for 79% of the total.
As of November 2018, a Ripple server required approximately 12GB of data storage per day and 8.4TB to store the full XRP ledger. However, a full node is not required to participate in the network and nodes can prune the ledger to free disk space.
Ripple offers a suite of tools for enterprise and banking solutions, collectively known as RippleNet, including; xCurrent, xRapid, and xVia. xCurrent processes global bank to bank payments for customers and is analogous to SWIFT. xRapid, which went live in October 2018, sources on-demand liquidity through buying and selling XRP. xVia can be used to send unidirectional payments. Of the three tools, only xRapid requires the use of the XRP token. In October 2019, Ripple announced the services would now all connect through one RippleNet portal.
In July, Ripple announced invested US$30 million in MoneyGram, announcing a strategic partnership with RippleNet. Ripple agreed to provide a capital commitment to MoneyGram, enabling the company to draw up to US$50 million in exchange for equity over a two-year period. Last week, Ripple invested a further US$20 million in MoneyGram, increasing Ripple’s stake in the company to about 10% and allowing for a further increase to 15% total stake in the future.
Ripple also has two other monetary arms to foster the growth of the ecosystem, a venture capital arm and a university blockchain research initiative (UBRI).
The venture capital arm, Xpring, invests in, incubates, acquires, and provides grants to companies and projects run by proven entrepreneurs. In May, Xpring invested in Agoric, a smart contract platform. Other public investments of Xpring include Dharma, Kava, XRPL Labs, Forte, and Bolt Labs. Recent investments include the Coinme ATM provider, the Logos Network, a self-custody startup Towo Labs and a US$750,000 infusion to BRD wallet.
The UBRI has US$50 million in funding reserved for grassroots research and development related to XRP. In total, the UBRI consists of over 40 universities worldwide and the UBRI has helped launch over 100 active research projects on various topics.
Additionally, Rippleworks, a non-profit focused on funding social ventures, was created in 2015 by Chris Larsen and Doug Galen. Rippleworks has paired startups and technology experts with 80 different social ventures. Earlier this year, Larsen and his wife donated US$25 million in XRP tokens to San Francisco State University.
The external XRP protocol ecosystem includes Interledger, Coil, and Codius, all of which are related in terms of functions and development teams.
The Interledger Protocol (ILP) is capable of sending payments across different distributed and decentralized ledgers, and moves funds via intermediaries.
Coil enables subscription-based donations for content monetization on the internet, without advertising or selling user data, and pays sites in real-time through a Web Monetization API. A similar micropayment system for content monetization is used by the Brave browser.
Codius is a smart contract and smart program platform allowing for interoperability between blockchains. In November 2018, the Bill & Melinda Gates Foundation announced plans to use ILP and Coil, in conjunction with Mojaloop, to bring payments to the under and unbanked.
On the network side, transactions per day have recently increased to nearly four million, a four-fold increase over the past month. Most of these transactions have been generated by the ‘Payment’ and ‘OfferCreate’ function, a transfer of value and a currency exchange facility, respectively. The spike in these transactions likely represent spam by attempting to send fake transactions. The average transaction fee (fill, chart below) remains US$0.00033, among the lowest of any cryptocurrency.
Weekly active addresses (WAA) have decreased substantially since January 2018 (line, chart below) but reached an 18-month high in mid-July. Overall, WAA have increased slightly over the past month. A large uptick in active addresses should be seen as a bullish indicator, as it suggests increasing demand for the asset. The largest increases in WAA were in mid and late 2017, corresponding to large increases in price.
The average transaction value (fill, chart below) on the network has essentially held between US$1,200 and US$6,500 since March 2018. Average transaction values have increased since January this year and remain well above the historic average. Due to monthly escrow transactions, these values are likely slightly higher than actual organic use.
The 30-day Kalichkin network value to estimated on-chain daily transaction ratio (NVT) is currently 192 and falling, which is below most of the historic range (line, chart below). Although NVT is difficult to compare between coins, which use different transaction types, the metric can be useful when comparing a networks relative utility over time. For example, XLM, which uses a similar network structure to XRP, currently has an NVT of 135.
However, a falling NVT should be considered bullish as it suggests increasing network utility. Escrow transactions or coin arbitrage will falsely skew NVT significantly lower. A sharp decline in NVT below 100 would suggest bullish price action, which last happened in December and January 2018.
Turning to developer activity, the Ripple project has 77 Github repos with over a cumulative 197 commits over the past year from nearly 70 contributors. Rippled version 1.4.0 was released last week. Most of the XRP related commits occurred in the Ripple dev portal (top chart below) while the rippled repo has seen very few commits over the past few months (bottom chart below).
Most coins use the developer community of Github where files are saved in folders called "repositories," or "repos," and changes to these files are recorded with "commits," which save a record of what changes were made, when, and by who. Although commits represent quantity and not necessarily quality, a higher number of commits can signify higher dev activity and interest.
XRP exchange-traded volume over the past 24 hours has been led by the Tether (USDT) and Bitcoin (BTC) pairs. Both the South Korean won (KRW) and Japanese Yen (JPY) markets have generated a significantly higher percentage of volume than most. Exchange volume for XRP pairs is led by Binance and Huobi.
XRP has seen a slurry of custody and exchange-related announcements since late 2018. In November 2018, OKEx opened the XRP/BTC pair for margin trading and the Trezor Model T hardware wallet announced support for storage. In December 2018, XRP pairs were listed on Coinbene and KuCoin, while Binance listed several XRP base pairs.
In January, OKEx added a perpetual swap with 40x leverage and the exchange Bitrue also added several XRP base pairs. Bitcoinus, the Gibraltar Blockchain Exchange, BigOne, Biger, LykkeX, ProBit, and BankCEX also added trading pairs in December and January. In late February, Coinbase listed trading pairs and added XRP to the Coinbase wallet.
In May, the German exchange Börse Stuttgart listed exchange-traded notes (ETNs) based on Litecoin (LTC) and XRP. Coinbase Pro also added XRP for New York residents and the retail trading platform Abra began allowing for CRP withdrawals. The upcoming Binance US exchange will also list XRP pairs. Fidelity Digital Assets may also list trading pairs later this year.
In June, two exchanges, Gatehub and Singapore’s Bittrue, were hacked for US$10 million and US$4.5 million in XRP, respectively. Both exchanges estimated that hackers managed to compromise around 100 user accounts. The Gatehub hack involved compromising XRP ledger wallets through the Gatehub API, whereas the Bittrue hack involved compromising Bittrue accounts through a review process vulnerability. Gatehub has essentially blamed the vulnerability on the XRP ledger and will not refund losses. Conversely, Bittrue plans to reimburse the stolen funds completely.
Additionally, in mid-July, the Japanese exchange Bitpoint reported a hot and cold wallet hack of US$32 million involving BTC, LTC, ETH, and XRP. Remixpoint, the parent company of Bittrue, said it would compensate customers for the losses.
Most recently, Binance.US added XRP/USD and XRP/USDT pairs, Binance added an XRP/BNB pair and XRP/ETH margin pair, and FXCM added a cryptocurrency offering, including Ripple, to their retail trading platform. Binance also issued the XRP-BF2 token on the Binance Chain, tradeable on the Binance DEX. XRP-BF2 is a pegged token backed 1:1 by XRP assets which tracks the value of the native asset of the XRP ledger.
Aside from a brief period between December 2017 and February 2018, worldwide Google Trends data for the term "Ripple" has mostly been pinned to the floor. The increase in 2018 likely signaled a large swath of new market participants at that time. A 2015 study found a strong correlation between the google trends data and bitcoin price, while a 2017 study concluded that when the U.S. Google "bitcoin" searches increase dramatically, bitcoin price drops.
Technical Analysis
To help determine entry and exit points, Exponential Moving Averages, Volume Profile of the Visible Range, Pitchforks, and the Ichimoku Cloud can be used. Further background information on the technical analysis discussed below can be found here.
On the daily chart for the XRP/USD market, the 50-day and 200-day Exponential Moving Average (EMA) created a bullish cross on May 31st, preceding muted bullish momentum. A Death Cross occurred in mid-July followed by a 34% bearish drop. Over the past month, the spot price has fallen further and further below the 200-day EMA. There are no active volume or RSI divergences at this time.
Volume Profile of the Visible Range (VPVR, horizontal bars on the chart below) shows that most of the trading volume historically occurred near the US$0.30 to US$0.34 zone. The indicator also shows relatively little volume above US$0.54. Since September last year, the asset has been trading in a defined range between US$0.25 and US$0.53, only recently falling below this range.
Long/short open interest (top panel, chart below) on Bitfinex is currently 68% long, with longs decreasing and shorts increasing over the past week. A significant price movement downwards will result in an exaggerated move as the long positions will begin to unwind. This is known as a "long squeeze."
A potential bearish Pitch Fork (PF), with anchor points in December and April, encapsulates the range of the current downtrend. The spot price will continually attempt to return to the median line (yellow) throughout the duration of the trend, currently at US$0.17.
The lower bounds of support represent a buy zone whereas the upper bounds of the resistance represent a sell zone. The trend will remain bearish until the asset definitively breaches either zone. The upper bound is currently US$0.35 resistance. The median zone also matches the 2017 triangular consolidation zone. Overall, the current spot price remains within the period of consolidation seen in 2017.
Turning to the Ichimoku Cloud, there are four key metrics; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, and the Lagging Span. Trades are typically opened when most of the signals flip from bearish to bullish, or vice versa.
On the daily chart, Cloud metrics are bearish; price has fallen below the Cloud, the Cloud is bearish, the TK cross is bearish, and the Lagging Span is below Cloud and below the spot price. A traditional long entry will trigger when the spot price is once again above the Cloud, which has only happened once over the past few years, in mid-November 2018.
Lastly, on the daily XRP/BTC chart, trend metrics show an active mean reversion attempt. A bearish Kumo breakout occurred on February 16th, followed by a bearish 50/200EMA Death Cross on March 26th. Over the past few weeks, the spot price has failed to complete a bullish Kumo breakout, which also suggests further bearish downside. Significant buying momentum is unlikely to return until price breaches the 200-day EMA. A retest of the local low at 2,400 sats is likely so long as price remains below the Cloud. VPVR also shows a significant volume node from 4,100 sats to 5,100 sats.
Conclusion
Fundamentals show decreasing transactions with decreasing active addresses over the past year, despite the numerous RippleNet partnerships and announcements. It remains difficult or impossible to determine if institutional or remittance use cases are reflected in the current on-chain metrics, or if these metrics are fueled purely by speculative demand. For many, regulatory clarity is still needed in regards to the possibility of the XRP token representing an unregistered securities offering by Ripple Labs. Meanwhile, XRP continues to gain exchange listings globally.
Technicals for both the XRP/USD and XRP/BTC pairs are suggestive of a failed mean reversion attempt. The litmus tests for a trend reversal on any pair includes the spot price position relative to both the 200-day EMA and the Cloud on the daily timeframe. For XRP/USD, a breach of US$0.30 on high volume would likely meet these requirements, otherwise, bearish continuation towards US$0.16 is likely.
For the XRP/BTC pair, the market is likely to hit resistance near 4,100 sats - 5,100 sats where a period of re-accumulation will likely occur. During this time, the spot price will likely remain above the Cloud and above the 200-day EMA, bringing additional bullish momentum. The 5,000 sat level is a critical psychological resistance hurdle for any bullish trend towards the end of the year. In the near term, a retest of the local low at 2,400 sats is extremely likely. Significant downside support sits between 500 and 1,500 sats should the current local low fail.
OhNoCrypto
via https://www.ohnocrypto.com
Josh Olszewicz, Khareem Sudlow