Ripple is at the center of attention of the crypto community after a group of Redditors responsible for pumping failed stocks of GameStop and AMC Corporations choose to orchestrate the same buying frenzy for XRP. But analysts warn that XRP may face massive decline.
The last four days have witnessed the XRP/USD exchange rate surge from $0.23 to as high as $0.77—a 228 percent rise. The pair’s gains pushed the XRP’s market cap to $32 billion at one point in time, making it the fourth most valuable cryptocurrency.
As of Monday, XRP was correcting lower, led by profit-taking sentiment. Its price 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.
What has worked in favor of Ripple is no underlying fundamental but WallStreetBets, a Reddit group which aims 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 crypto 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 which 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 fast dropped by as much as 79 percent from its latest high of $0.01.
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 Ripple token—with its traders choosing whether to pump it higher or dump it lower.
But the Ripple token, XRP, is still to see massive decline. Only unlike Dogecoin, it has some bullish news to continue its upside trends.
For a little background, the San Francisco firm is seeing 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 leading exchanges, such as 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 as 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 boost the Ripple rally. The token still remains overbought on all accounts and could risk a technical correction. Analyst Michaël van de Poppe believes 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 warned about the possible decline. “Determine the levels where you might going for an entry for a scalp trade to reduce your potential risk.”