XRP made headlines recently by reaching a 7-year peak and surpassing the $3 threshold. Since the beginning of the year, this alternative cryptocurrency has surged by 52%, with substantial accumulation by large investors. In the last two months alone, whales have acquired over 1.4 billion XRP, marking a significant 35% spike in demand.
Another positive development is the decrease in XRP deposits to exchanges. This shift prompted CryptoCrypto to conduct a thorough analysis of various indicators to gauge the market sentiment toward XRP.
XRP Analysis: Interpreting Conflicting Signals
One crucial metric to consider is the total number of deposit transactions on exchanges. A higher count usually signifies an uptick in potential selling activity, as well as the possibility of increased margin trading using XRP as collateral.
During the consolidation phase in December, XRP deposits experienced notable spikes. Despite this, the bulls managed to defend the $2 support level against selling pressure. Interestingly, the recent rally was accompanied by a decline in deposits, indicating subdued selling pressure in the current market environment.
XRP’s price surged rapidly in early November, leading to a corresponding rise in the estimated leverage ratio (ELR) metric. The ELR, calculated by dividing an exchange’s Open Interest by its coin reserves, offers insights into the prevalence of leveraged trading during bullish trends.
Following a period of consolidation in the latter half of December, the breakout above $3 drove the ELR higher, serving as a potential warning for traders.
Recent data shows a rise in XRP exchange reserves over the past fortnight, which could signal a bearish outlook contradictory to the declining deposit count.
While some profit-taking pressure may exist, it appears insufficient to deter the bullish momentum. This suggests that traders might be utilizing XRP as collateral for margin trading.
The increasing ELR and exchange reserves indicate potential short-term volatility that could adversely affect traders. This might lead to liquidity challenges and a subsequent consolidation phase, the timing of which remains uncertain.