Prominent traders have opened short trades on XRP with substantially large volumes, as some expect the altcoin to record a pullback from here.
XRP has been on a remarkable rally, surging 283% in November and closing above $1.95. Interestingly, the momentum carried into December, with prices climbing 40% in just three days to trade above $2.70.
XRP’s explosive growth has seen it overtake Binance Coin (BNB), Solana (SOL), and USDT to become the third-largest cryptocurrency by market cap. However, the market is split on what comes next.
Traders Open XRP Shorts Amid Overbought Condition
Indicators signal overbought conditions. XRP’s daily RSI has climbed to 94, and its CCI is at 220. These figures suggest the asset might be ripe for a pullback, leading traders like Elon Trades to take short positions. Elon noted he has opened a $500,000 short on XRP, predicting a decline below $2.
Just opened a half-million dollar short on $XRP.
See you guys sub $2. pic.twitter.com/xbjHj35gH5
— ElonTrades (@ElonTrades) December 2, 2024
This move triggered mixed reactions. Crypto proponent Micah Paul was skeptical, referencing past traders who unsuccessfully shorted XRP. Pundit Chad Steingraber pointed out several upcoming developments that could keep XRP’s momentum alive.
He highlighted the forthcoming launch of RLUSD and the potential resolution of the SEC vs. Ripple case. Steingraber also noted the potential approval of multiple XRP-based ETFs as catalysts for further price growth.
Despite this, another trader Midjet revealed a similar short position on XRP at $2.71 while also longing Solana at $222. When questioned about a previous unsuccessful short, he defended his strategy by claiming he was “early” rather than wrong.
Shorting XRP @ 2.71
Longing SOL 222.05
Working for my bags pic.twitter.com/s64Y6l9NDa
— Midjet (@0xmidjet) December 2, 2024
In addition, notable crypto trader Gordon also disclosed that he has placed a $250,000 short position on XRP. He expects to flip this to $5 million if XRP drops to his target level but could be liquidated if the token surpasses $3 and claims the $3.1 mark.
Just opened a $250K XRP short.
Liquidation is $3.10
If it hits my target I make $5M.
Sorry ripple fans, but it’s over 😎 pic.twitter.com/IjHc3E0Fxs
— Gordon (@AltcoinGordon) December 3, 2024
XRP Could Ride on Surging Shorts
However, other market pundits have warned against shorting a high-performing asset such as XRP. Castillo Trading argued that shorting XRP, a coin driven heavily by retail interest, was ill-timed.
Shorting $XRP right now IMO isn’t the best move. Seen many people short it with confidence.
Why would you short one of the most popular retail driven crypto coins in the world? It probably see’s $5 with the momentum this cycle has.
GL short sellers, but you’re too early.
— Castillo Trading (@CastilloTrading) December 3, 2024
He suggested that XRP could rally to $5, given its current momentum. Ridey, another trader, agreed, noting that XRP’s price surge was primarily driven by spot buying, with funding rates remaining stable.
Market analyst Dom also attributed XRP’s rally to robust spot buying. He noted that spot cumulative volume delta (CVD) was rising, indicating genuine demand, while futures CVD was falling as traders continued to bet on a pullback.
$XRP spot buying is the driver behind this rally
Spot CVD is soaring, showing genuine buying demand driving the rally
Futures CVD is tanking as traders keep piling into shorts, expecting a pullback
If spot demand keeps up, it could trigger more short squeezes
People really… pic.twitter.com/vOrjkJ76Kx— Dom (@traderview2) December 3, 2024
Interestingly, Dom stressed that the dominance of short positions could lead to additional short squeezes, pushing prices even higher.
For context, data from Coinglass showed a 41% increase in XRP derivatives trading volume to $65 billion, with a long-short ratio of 0.9893. This ratio indicated a slight dominance of short positions. As more traders expect a correction, the risk of a short squeeze grows.
A short squeeze occurs when an increase in price forces short sellers to close their positions, often by buying back the asset. This buying pressure can in turn drive prices even higher, bolstering the ongoing rally.
With XRP’s retail-driven momentum, a sustained influx of spot buying could trigger mass liquidations, further boosting growth. At press time, XRP changes hands at $2.74, up 11.55% over the last 24 hours and by a more substantial 89% in the past week.
DisClamier: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
