XRP price exploded by 40% in a single day as liquidations across futures exchanges topped $73.5 million. The markets seemed appealing on Christmas Day. The token surged by 52% at the day’s peak.
Behind that unexpected surge was a big short squeeze that resulted in the massive volatility within hours. The rise was caused by a short squeeze across futures exchanges due to the speed of the rally.
It took XRP almost four hours to gain from $0.2536 to as high as $0.3120. Since that time, it has pulled back to almost $0.3550 on major exchanges, including Binance.
What Caused The Huge XRP Short Squeeze?
When the whole crypto market corrected on December 23, XRP experienced the highest amount of liquidations, surpassing both Ether (ETH) and Bitcoin (BTC). Liquidations happen in the futures market when the asset’s price sees a huge price movement and a short (sell) or a long (buy) position is overleveraged.
A good example is the case of a trader that uses a 10X leverage; they can trade an amount that is ten times bigger than the base capital. However, if the asset’s price moves against the position by 10%, that position is liquidated and it becomes worthless.
In the case of XRP, a significantly long squeeze happened after the US Securities and Exchange Commission filed a $1.3B lawsuit against Ripple and two of its executives. The excessive shorting of XRP followed as the price of XRP dropped to as low as $0.2138. But since the market swayed severely to shorts, a short squeeze occurred on December 25.
In that context, the XRP price saw a rapid upsurge within four hours. In the past 24 hours, data acquired from Bybt.com indicates that $73.5 million worth of XRP futures contracts were liquidated.
Some technical analysts forecasted an XRP short squeeze, spotting the trend of excessive shorting. One pseudonymous analyst called “Crypto ISO,” said:
“XRP probably goes up. Is it prudent to short something after such a big drop with the news already out? Not sure what the bull case is real and wouldn’t touch it but also wouldn’t try and milk much more on a short. Coinbase delisting might be the final hit if that happens.”
XRP Is At Risk Of Delisting By US Exchanges
Analysts are still divided on XRP’s short- to medium-term future. Some believe that even if XRP is considered to be a security in the United States, it is used worldwide, and as such, the SEC’s case alone would not mean the end for Ripple’s XRP.
The pseudonymous trader called “Credible Crypto” said that XRP is not a security in Japan, Singapore, and some of the other jurisdictions. He said:
“90% of Ripple’s customers are not in the US. 90+% of $XRP trading volume occurs on exchanges outside the US. $XRP is NOT security in Singapore, the UK, Switzerland, and Japan. If you think the SEC case is sending $XRP to $0, you may not be thinking objectively. $XRP is global.”
Nonetheless, the lawsuit might have a major impact on the token, since Ripple is a US-based firm and XRP supply is managed mainly by American citizens. Thus, “Neko,” a crypto investor, said it is still a big issue. He said:
“This is true about the volume. But you are also forgetting that management of $XRP are US citizens and so is the corporation. If the SEC deems it a security, exchanges that interact with US clients will have to delist. I wouldn’t say it’s a 0 but it’s still a big issue.”
