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XRP price rebounds 40% on liquidation of short positions

Posted on 25. Dezember 2020 in Bitcoin

XRP traded up 52 percent overnight and then stabilized at a 40 percent level above the previous day’s value. The price spike was caused by the liquidation of margin positions in the futures market.

XRP rose from $0.2536 to $0.3120 in four hours. After a brief correction, the token returned to a local high of $0.3775.

Hourly chart of XRP/USD exchange Bitstamp from TradingView.

XRP faced a contract liquidation on 23 December. During a Bitcoin Bank review general correction in the cryptocurrency market, the token’s price fell harder than bitcoin and Ethereum.

The fall in XRP’s price was exacerbated by fundamental factors – the day before, the US Securities and Exchange Commission filed a lawsuit against Ripple and two of its executives.

The ensuing sell-off brought the XRP price down to $0.2138. The sharp drop led to a significant imbalance in favour of short orders and a short squeeze (short squeeze) occurred on December 25.

XRP short positions were liquidated by $73.5 million in 24 hours.

Shortly before that, some analysts had indicated a high probability of a short squeeze.

„It is possible that XRP will rise. Is it wise to go into a short position after such a significant drop? I’m not sure a bullish scenario will take place, but I wouldn’t try to make money on a short either. Delisting [XRP] on Coinbase could be the final blow [to Ripple] if there is one.“

A short squeeze is a situation where the price of an asset drops or rises sharply and leveraged traders find themselves unable to cover losses for margin positions. Because of the mass closing of positions, the price bounces in the opposite direction.

To recap, Pantera Capital CEO Dan Morehead was recently optimistic about the prospects for XRP and Ethereum.