XRP bulls could face 'bloodbath' if Bitcoin dominance rises: Analyst

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XRP bulls could face 'bloodbath' if Bitcoin dominance rises: Analyst

crypto :: 2024-12-06 :: source - cointelegraph

By Ciaran Lyons

XRP has fallen almost 18% since hitting its yearly high on Dec. 3, but traders still hope for a strong rebound. Their optimism may be tested if Bitcoin dominance continues to increase, a crypto analyst said.

“The real danger right now for highly leveraged XRP bulls is that Bitcoin dominance increases again. A rotation from XRP to Bitcoin would very likely lead to a bloodbath of liquidations,” crypto exchange Swyftx lead analyst Pav Hundal told Cointelegraph.

Markets have developed a ‘thirst’ for XRP long positions

At the time of publication, Bitcoin BTC $97,903 dominance was 55.30%, down 5% over the past week, as per TradingView data. Some traders speculate that Bitcoin dominance may peak in the 60% to 70% range before the rotation of capital into altcoins begins.

XRP, Markets — *Bitcoin dominance is 55.27% at the time of publication. Source:* *TradingView*

“We’ve seen a lot of quick twitch buying by retail over the last few weeks, and open interest is now close to double the levels we saw in 2021,” Hundal said.

Hundal added that the market seems to have “developed a thirst for leveraged long XRP exposure.”

“I’m watching XRP longs being reloaded even as prices shift lower,” he said.

XRP XRP $2.27 was trading at $2.37 at the time of publication. Even a 7% retrace from its current price to $2.18 will wipe out $104.4 million in long positions.

Hundal said, “It’s starting to look like the market could be approaching euphoria territory.”

For most of 2024, XRP traded in a narrow range between $0.48 and $0.73. That changed after Donald Trump’s US presidential win on Nov. 5, triggering a 431% rally. By Dec. 3, XRP reached $2.85.

On Dec. 5, XRP Open Interest (OI) — a metric tracking the total number of unsettled Bitcoin derivative contracts such as options and futures — clocked $3.44 billion, per CoinGlass data.

Bitcoin stabilizing will ‘sooth nerves’

It was nearly $1.44 billion higher than the $2 billion open interest XRP recorded in April 2021 during a similar price rally.

The XRP/BTC ratio — XRP relative strength compared to Bitcoin — is 0.00002375, up 2.72% since Dec. 5 and up 47.6% over the past 30 days, as per TradingView data.

Hundal said if Bitcoin stabilizes, it “could soothe nerves and spot volumes could pick up again.”

“The funding rates on Binance are not hot, but across other exchanges, they are pretty warm. Anything over 50% on the one-year funding rate heatmap is generally considered pretty exuberant,” he said.

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