Analysis: Ripple (XRP) Risks Massive Declines After WallStreetBets-Led Pump

Ripple is back at the center of attention of the cryptocurrency community after a group of Redditors responsible for pumping failed stocks of GameStop and AMC Corporations choose to orchestrate the same buying frenzy for the blockchain firm’s native token XRP.

The last four days have witnessed the XRP/USD exchange rate jump from $0.23 to as high as $0.77—a 228 percent rally. The pair’s gains pushed the XRP’s market capitalization to $32 billion at one point in time, making it the fourth most valuable cryptocurrency in the space.

Ripple awaits correction after pumping 228 percent in four days. Source: XRPUSD on TradingView.com

Ripple awaits correction after pumping 228 percent in four days. Source: XRPUSD on TradingView.com

As of Monday, the Ripple token was correcting lower, led by profit-taking sentiment. Its price against the dollar fell by 22.42 percent during the Asian and European session, leaving exposed traders with two options: Either repurchase it at the local lows or exit altogether after securing remaining profits.

/r/WallStreetBets Alert

What has worked in favor of Ripple is no underlying fundamental but WallStreetBets, a Reddit group that is on a mission to send rich hedge funds into losses. Their recent stint in the $43 trillion US stock market rallied the most-shorted stocks, forcing Melvin Capital to close its bearish positions with more than 53 percent of its capital wiped.

The cryptocurrency community, known for its anti-establishment views on global finance, has eyed WallStreetBets as their cue to orchestrate similar mob-led bullish frenzies.

Dogecoin, a meme cryptocurrency that practically has no reason to exist but to make jokes about the crypto sector, jumped more than 1,100 percent in a copycat rally. Nevertheless, its price quickly crashed by as much as 79 percent from its latest high of $0.01.

Ripple is back at the center of attention of the cryptocurrency community after a group of Redditors responsible for pumping failed stocks of GameStop and AMC Corporations choose to orchestrate the same buying frenzy for the blockchain firm’s native token XRP.

The last four days have witnessed the XRP/USD exchange rate jump from $0.23 to as high as $0.77—a 228 percent rally. The pair’s gains pushed the XRP’s market capitalization to $32 billion at one point in time, making it the fourth most valuable cryptocurrency in the space.

Ripple awaits correction after pumping 228 percent in four days. Source: XRPUSD on TradingView.com

Ripple awaits correction after pumping 228 percent in four days. Source: XRPUSD on TradingView.com

As of Monday, the Ripple token was correcting lower, led by profit-taking sentiment. Its price against the dollar fell by 22.42 percent during the Asian and European session, leaving exposed traders with two options: Either repurchase it at the local lows or exit altogether after securing remaining profits.

/r/WallStreetBets Alert

What has worked in favor of Ripple is no underlying fundamental but WallStreetBets, a Reddit group that is on a mission to send rich hedge funds into losses. Their recent stint in the $43 trillion US stock market rallied the most-shorted stocks, forcing Melvin Capital to close its bearish positions with more than 53 percent of its capital wiped.

The cryptocurrency community, known for its anti-establishment views on global finance, has eyed WallStreetBets as their cue to orchestrate similar mob-led bullish frenzies.

Dogecoin, a meme cryptocurrency that practically has no reason to exist but to make jokes about the crypto sector, jumped more than 1,100 percent in a copycat rally. Nevertheless, its price quickly crashed by as much as 79 percent from its latest high of $0.01.

Dogecoin is consolidating inside a volatile swing range after its supersonic pump and dump. Source: DOGEUSD on TradingView.com

Dogecoin is consolidating inside a volatile swing range after its supersonic pump and dump. Source: DOGEUSD on TradingView.com

The joke token still has not given up on its bullish dreams. After settling a low near $0.02 on Saturday, it corrected back to the upside by more than 100 percent. It is now consolidating sideways—just like XRP—with its traders choosing whether to pump it higher or dump it lower.

XRP Lawsuit

But the Ripple token is still to see its red candle. Only unlike Dogecoin, it has some bullish news to continue its upside moves.

For a little background, the San Francisco firm is facing a lawsuit filed against it by the Securities and Exchange Commission. The US securities regulator alleged in December that Ripple Labs, its CEO Brad Garlinghouse, and co-founder Christian Larsen sold over 14.9 billion XRP units, which it unregistered security, for about $1.38 billion.

XRP/USD lost half of its value after the court filing, with many top exchanges, including Coinbase and Binance, choosing to delist it until further notice.

On January 29, Ripple Labs officially responded to the SEC complaint, alleging that the regulator is out of its jurisdiction because the US Department of Justice and the Financial Crimes Enforcement Network (FinCEN) have already confirmed that XRP is not a security.

“Basically, on its way out, the Trump administration sought to undo the determination that XRP was a virtual currency made during the Obama administration,” the company added.

While the verdict is still unclear, the response may have helped fuel the Ripple rally. The token still remains overbought on all accounts and could risk a technical correction. Analyst Michaël van de Poppe thinks the next buying opportunity is when it trades in the range of $0.45-$0.50 but risks of longing XRP remains higher.

“Avoid chasing pumps on DOGE and XRP,” he added. “Determine the levels where you might going for an entry for a scalp trade to reduce your potential risk.”

MicroStrategy up 113% post stock downgrade thanks to Bitcoin

Microstrategy (NASDAQ:MSTR) stock managed to surge by roughly 113% since 8 Dec when it was downgraded by an analyst from Citigroup

On 8 December, 2020, Citigroup, one of the largest banks in the world, decided to downgrade MicroStrategy’s stock. Since then, MSTR stock posted gains of 113.27% as it rallied from $289.45 to $617.31. The price increase mostly came as a result of the Bitcoin (BTC) price increase.

In the same period, the Citigroup stock posted losses of 0.63%, as it managed to move from a price of $58.36 to $57.99.

MicroStrategy vs Bitcoin vs NASDAQ price chart. Source: Ecoinometrics

MicroStrategy stock unaffected by the downgrade

MicroStrategy has been very vocal about investing its treasury holdings in Bitcoin, making BTC its treasury reserve asset. At the moment of writing, it is the biggest public company Bitcoin holder with over 70,000 BTC worth roughly $2.4 billion at current prices.

On top of that, MicroStrategy announced it is raising $550 million in capital from convertible bonds. In an official statement, MicroStrategy stated it intends to invest in Bitcoin with the entire proceeds of the bond. This statement is likely the main reason Citi decided to downgrade MicroStrategy.

At the time, Citigroup analyst Tyler Radke downgraded MSTR to sell rating. He stated that he acknowledges the impressive returns on MicroStrategy’s Bitcoin investment, but said the market is overpricing its core business. He wrote:

“MSTR’s Bitcoin investment has returned $250M ($26 per share-worth or +20% towards stock) since August 2020. While impressive, the return pales in comparison to the 172% return that its stock made. At the current stock price, our analysis comes to the conclusion that the market is pricing in much more optimistic valuation scenarios for MSTR’s core business and Bitcoin.”

Since December 2020, on the other hand, the price of Bitcoin saw an explosive rally. While Radke’s scepticism towards the core business of MicroStrategy certainly has some merit, Bitcoin saw a rally of over 100% in December, pushing from $18,319 all the way to an all-time high of $42,000.

Michael Saylor is extremely bullish on Bitcoin

MicroStrategy remains an important institutional Bitcoin supporter, as well as a multi-billion dollar business intelligence firm. As long as Bitcoin’s price continues to surge in the short term, the stock price of MSTR will most likely have a positive effect.

Michael Saylor, MicroStrategy’s CEO, remains fully confident in the company’s position on Bitcoin. In the Q4 financial results for 2020, Saylor stated that the company plans to hold their current BTC positions as well as invest additional excess cash flows into the largest cryptocurrency by market cap

Bitcoin price poised for new highs after strong weekend

Bitcoin is likely to break higher after consolidating around $33,000 for most of the weekend

Bitcoin price has surged by about 3% in the past 24 hours and is looking to break higher. This follows last week’s solidifying of support around the $30,000 line.

Keeping the support line and crossing the $34,500 mark are positive signals for the weekly outlook.

The benchmark cryptocurrency is also likely to see some upside action as the week starts given the bullish sentiments of Tesla CEO Elon Musk.

After changing his Twitter bio to #Bitcoin last week, the world’s richest man now supports BTC. According to Forbes, the billionaire has also said that Bitcoin is ready for greater adoption. Making his comments on the audio chat platform Clubhouse, he noted:

“I am a supporter of bitcoin. I am late to the party but a supporter.”

A strengthening of the short term bullish picture could therefore see buyers target a run towards the $40,000 level. On the contrary, a breakdown from current prices and a retest of $30,000 could see validation of a bearish chart formation. If this happens, prices could drop as low as $21,000.

BTC/USD

The daily chart shows Bitcoin printed a long wick, then a Doji candlestick pattern over the weekend. The long wick points to the aggression by which bears defended prices around $38,000. On the other hand, the wick showed a lack of decisiveness from both buyers and sellers

BTC/USD daily chart. Source: TradingView

As can be seen on the chart, bulls are trying to break above the descending trendline that has so far aided the bears’ stubbornness. The bearish resolve will weaken even further if bulls pull away from the trendline.

The 20-day exponential moving average ($33,546) now acts as an immediate anchor, with prices retesting the $34,500 barrier. However, it’s likely some sellers could still be hovering in the shadows around $38,800. If there is increased buy-side pressure, the BTC/USD pair could easily surge to $40,000-$42,000 region.

Failure to clear the hurdle set by the downward trend line (blue dotted), could see BTC/USD decline to the horizontal support line.

The price action, in this case, would include a breakdown past the 20-EMA ($33,546), with major support likely at the 50-EMA ($30,672). There is also the horizontal line at $30,000 that looks solid at the moment.

A breakdown beyond $30,000 validates the bearish outlook hinted to by the descending triangle pattern. If this happens, bulls have initial support at $28,800. The 0.5 Fibonacci retracement level ($25,673) and the 0.618 Fibonacci retracement level ($21,936) also provide further support

BLOCKCHAIN

Cardano, SushiSwap, IOTA Price Analysis: 01 February

Cardano was trading within a range from $0.32 to $0.38 and showed signs of being in a consolidation phase. SushiSwap was bullish on the charts and likely to go past $10, while IOTA found support at the $0.39 mark but lacked interest from buyers to attempt another move past $0.45.

Source: ADA/USDT on TradingView

Using the 12-hour timeframe for some context, it can be seen that ADA is in a phase of consolidation within the range from $0.32 to $0.38. The Bollinger bands tightened around the price to indicate lowered volatility while trading volume also fell.

The shorter timeframes showed there as some volatility present for ADA as it went about the $0.35 mark.

In the meantime, the mid-point at $0.35 is the most important level for ADA- and the market was indecisive in the short-term after a move above $0.35 saw ADA face resistance at $0.365. The momentum was neutral on longer timeframes and bearish on shorter timeframes such as the 1-hour chart.

SushiSwap [SUSHI]

Source: SUSHI/USDT on TradingView

SUSHI broke above $8.9 resistance and reached as high as $11.3 before the selling pressure mounted. At the time of writing, SUSHI was trading at $9.8 and headed higher.

The RSI showed a value of 56 and stayed above the neutral 50 to indicate an uptrend in play. The $10 psychological was briefly claimed by the bulls and the skirmish was still ongoing, but it is likely that the next few hours would see SUSHI bulls rewarded for their persistence. The bears were unable to push prices beneath $9.7, marking it as a level to buy SUSHI at.

The Stochastic RSI descended into the oversold territory even though SUSHI traded right next to $10, adding to the likelihood that SUSHI would soon rise above $10.

IOTA

Source: IOTA/USD on TradingView

IOTA slipped beneath the $0.45 level last week and has been unable to recover, while the $0.39 mark has offered staunch support for IOTA.

The MACD showed neutral momentum for IOTA on the 4-hour charts. The ADR indicator has also been flat for the past week. Hence, over the next few days, some sideways trading can be expected for IOTA