BREAKING: XRP Price Surged 40% in a Surprise Relief Rally — Here's Why

28 Dec 2020, 09:37 · Views 272

Photo: Coin Telegraph

(Coin Telegraph) - XRP price spiked by 40% in the past 24 hours, recording a 52% gain at the day’s peak. Behind the surprising rally was a big short squeeze that caused massive volatility within hours.

It is evident that the upsurge was driven by a short squeeze across futures exchanges because of the speed of the rally.

XRP/USD hourly candle chart (Coinbase). Source: TradingView.com

It took XRP around four hours to surge from $0.2536 to as high as $0.3120. Since then, it has pulled back to around $0.3550 on major exchanges, including Binance.

What triggered the big XRP short squeeze?

On Dec 23, when the entire market corrected, XRP saw the highest amount of liquidations, surpassing both Bitcoin and Ethereum.

Liquidations occur in the futures market when the asset’s price sees a large price movement and a long (buy) or a short (sell) position is overleveraged.

As an example, if a trader uses a 10x leverage, a trader can trade an amount that is 10 times larger than the base capital. But if the asset’s price moves against the position by 10%, the position is liquidated and becomes worthless.

In the case of XRP, a long squeeze occurred after the United States Securities and Exchange Commission (SEC) filed a complaint against Ripple and two of its executives.

Excessive shorting of XRP followed as the price of XRP dropped to as low as $0.2138. But because the market swayed severely to shorts, a short squeeze occurred on Dec 25.

Consequently, XRP price saw a rapid upsurge within four hours. In the last 24 hours, data from Bybt.com shows that $73.5 million worth of XRP futures contracts were liquidated.

XRP liquidations. Source: Bybt.com

Some technical analysts predicted an XRP short squeeze, spotting the trend of excessive shorting.

Read more from the original article here.

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