Small Lawsuit Wins Pushes XRP Price Back to 2018 Highs; Pullback Ahead?
Key XRP Outlook
- XRP almost hits $1.5 for the first time since January 2018.
- The upside boost comes in the wake of small legal wins for Ripple Labs as it battles the US Securities and Exchange over a lawsuit.
- Technically, the Ripple token has climbed to overvalued levels, requiring a neutralizing price correction.
XRP, the de-facto settlement token atop the Ripple blockchain, has become traders’ eye-candy all over again after a series of blunders.
The cryptocurrency surged by up to 780 percent after bottoming out at $0.17 in December 2020, hitting almost $1.50 on the BitStamp exchange, its highest since January 2018. Meanwhile, on a year-to-date timeframe, it was up 591 percent as of this week’s open.
In retrospect, the recent gains in the XRP market come on the heels of two main factors: a technical undervaluation and some legal wins.
Why is the Ripple Token Exploding?
XRP started climbing in a period that saw most of its top rivals showing signs of upside exhaustion. For instance, Bitcoin, the leading cryptocurrency by market cap, slowed down its uptrend near $60,000. Meanwhile, Ethereum also lacked a follow-through rally after breaking a key psychological resistance level of $2,000.
Traders shift to assets that seem undervalued usually when they detect upside tiredness in rival tokens. Even a small piece of good news could move markets wildly during such times, which seems to be the case for XRP as it rallies tirelessly.
A slipping Bitcoin market cap has played a major role in propelling altcoins like XRP higher. Source: BTC.D on TradingView.com
At the core of its uptrend is a flurry of legal wins.
Ripple Labs, the company that backs XRP, is fighting a lawsuit filed against it by the US Securities and Exchange Commission (SEC). As a centralized blockchain powerhouse, the securities regulator alleges that Ripple sold XRP to its earlier investors to raise funds for its operations, making the token a security in nature.
Ripple argues against the allegation, citing the SEC’s very own classification of XRP’s rivals Bitcoin and Ethereum as utility tokens. Late last week, the San Francisco firm stepped towards exposing the SEC’s so-called bipolar nature towards crypocurrencies.
United States District Court Judge Sarah Netburn of the Southern District of New York ruled that the SEC must provide Ripple access to its memos and minutes expressing the agency’s view on XRP competitors. These documents expect to show what the US regulator thinks about Bitcoin and Ethereum.
Meanwhile, the court also denied the SEC’s request to access Ripple’s CEO Brad Garlinghouse and former CEO Chris Larsen’s personal financial records.
Outlook Ahead — Risky?
Technically, the Ripple token market alerts about overvaluation risks on longer timeframe charts.
XRP RSI alarms about downside correction. Source: XRPUSD on TradingView.com
The Relative Strength Indicator on XRP weekly chart sits above 70, indicating an overbought asset. Increasing upside speculation could lead the Ripple token further into the overvaluation zone. But ultimately, its risks of undergoing an equally volatile downside correction would increase.
XRP’s Fibonacci levels complement the bearish theory. The token now trades inside the $1.22-1.51 area, giving traders opportunities to place bets intra-range: opening a long position on a bounce-back from $1.22 towards $1.51 and/or a short position towards $1.22 on a pullback from $1.51.
A breakout above $1.51 opens extended upside opportunities towards $1.80. Meanwhile, a breakdown below $1.22 risks a decline towards $1.22.
Fundamentally, XRP’s outlook remains uncertain as long as it does not walk through the SEC lawsuit unharmed.
Photo by Bill Oxford on Unsplash
OhNoCryptocurrency via https://www.ohnocrypto.com/ @Yashu Gola, @Khareem Sudlow