Here’s Why We Have Our Eye on XRP #50
Market Meditations | December 7, 2020
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Here’s Why We Have Our Eye on XRP
Time for a change in topic. Bitcoin has been responsible for most of our headlines these past few weeks but today I’m covering something else. XRP has seen incredibly bullish price action in November and major exchanges keep announcing that they will support the upcoming SPARK token airdrop, scheduled to happen on December 12th. Let’s take a look at the recent XRP price action, explore what you need to do in order to qualify for the airdrop and why even controversial projects can provide incredible trade opportunities to those that are paying attention with an open mind.
Is XRP Going To $589?
When retail investors enter this market and look out for the ‘next potential bitcoin’, price predictions don’t always stay rational. The prediction of XRP going to $589 even became one of crypto Twitter’s favourite memes over the years. An understanding of the correlation between the outstanding supply of a token and the token price is a basic requirement, but not always present in the crypto investor’s toolbox. By quickly doing some napkin math, a token price of $589 per XRP would value the project at around ~$27 trillion, 16x the value of Amazon or 3x the total outstanding gold supply. We can dream!
With that out of the way, there has certainly been a reason for the increase in euphoria amongst the Ripple community. After a consolidation period of almost 2 years, XRP finally broke out of its accumulation zone in November and jumped from $0,26 to ~$0,7 in less than a week. 2017 market participants know that once XRP gains enough momentum, it runs aggressively and cuts through all short-term price targets like a hot knife through butter. This year wasn’t any different and the pace with which it broke upwards left many opportunists sidelined once again.
After that big impulsive move upwards, XRP is now being compressed in what looks to be a big consolidation pattern. Given that all higher time frame closes were bullish and a clear uptrend has been established, the higher probability play seems to be continuation upwards. That said, another long standing crypto meme often referred to as ‘buy the rumor, sell the news’ could cause some sell-pressure before and after the highly anticipated STARK token airdrop on December 12. There are no certainties in markets, but traders and investors should be aware of arguments on both sides at all times.
Major Exchanges Announce their Support for Token Airdrop
Given the magnitude of the community and support from almost every exchange, there are a lot of eyes on this fundamental event. Traders and investors buying XRP in anticipation of the SPARK airdrop has therefore been one of the main drivers behind XRP bullish price action in November.
Earlier this weekend, Coinbase announced their plan to support Flare Network’s upcoming Spark airdrop:
“If you are an eligible customer holding an XRP balance on Coinbase or Coinbase Pro on the snapshot date and time of December 12, 2020, 00:00 AM UTC, you’ll receive Spark tokens from Coinbase at a later date after the Flare network launch. The amount of Spark you’ll receive depends on how much XRP you had in your account at the snapshot time.”
Other exchanges like Binance had already announced their support for the airdrop so users wouldn’t have to withdraw their XRP balances in order to qualify for the airdrop.
On the Flare project’s website, users can find info on the SPARK token airdrop. The ratio of the airdrop will be 1:1, meaning that for every XRP a user holds he/she will receive 1 SPARK token, the native token of the upcoming Flare network, by holding XRP in self-custody or on a supported exchange on the specified date of the snapshot.
Fundamental Catalysts = Trading Opportunities
Public events like this create volatility because they are watched by so many market participants. Keeping an eye on websites like Coinmarketcal and Coinscalendar can help traders position themselves way in advance of public, highly anticipated events. Given that the crypto market is so narrative driven, price action going into these kinds of fundamental catalysts is often bullish and allows traders to participate with a certain bias.
Try to avoid letting your beliefs about a project limit the trading opportunities in the market. XRP is a prime example of a controversial project, with both a strong community of believers and a lot of haters, with trading opportunities often being missed because of a trader’s inability to let go of his or her belief or ego. As long as a trading pair is liquid enough to enter and exit, a trader shouldn’t necessarily believe in the vision of a project in order to profit from it.
And there we have it. Something different but true and consistent with our overall aim and theme of the newsletter: guiding market meditators through the crypto markets, highlighting technical and fundamental indicators that ought to be factored into trading strategies. XRP had a bullish month in November. As we have explored, some projections are exaggerated but it does seem to be the case that the higher probability play is a continuation upwards. Particularly given the level of support XRP has amongst exchanges. This makes it a very interesting trading opportunity and we shouldn’t miss it based on our beliefs around the coin or project.
Microstrategy Discloses New $50 Million Bitcoin Buy. MicroStrategy, the publicly traded business intelligence company has bought another $50 million in Bitcoin. CEO Michael Saylor announced the news on Friday, saying that the firm had purchased approximately 2,574 bitcoins for $50.0 million in cash at an average price of approximately $19,427 per bitcoin and that they now hold approximately 40,824 bitcoins. The move was to be expected after MicroStrategy said during their Q3 earning call that the firm would spend excess cash its $50 million in day-to-day operating cash on bitcoin. Read more.
Binance Expects to Make Between $800 Million and $1 Billion in Profits for 2020. Binance CEO Changpeng Zhao (CZ) expects the exchange to record $800 million to $1 billion in profit this year, a strong increase from last year’s $570 million in profit. CZ revealed the numbers in an interview with Bloomberg. As of December 7, Binance’s total spot trading comes in at roughly $892 billion, according to The Block Research. Binance also started offering futures trading in September 2019 and has quickly become one of the top derivatives exchanges. Read more.
Oil Dips Alongside Equities Selloff With Virus Concerns Weighing. Crude pared losses after falling as much as 2% in New York. U.S. and European equities were weaker early Monday with traders awaiting more details on a new U.S. stimulus package and as the U.K. warned Brexit talks could collapse. Meanwhile, Iran is preparing to raise exports in a sign the country expects the U.S. to ease some sanctions under a Joe Biden presidency. Read more.
Grayscale Sees a New Group of Ethereum-First Investors. Managing director at Grayscale Investments LLC Michael Sonnenshein said that while bitcoin was the first choice before this year, a growing number of investors are paying attention to Ethereum in its own right this year. Sonnenshein said that ‘“over the course of 2020 we are seeing a new group of investors who are Ethereum-first and in some cases Ethereum-only” and that “Ethereum has along the same lines of the staying power bitcoin has.” Read more.
Bequant, Global Digital Finance Look to Create Best Practices for DeFi. A working group created as a partnership between crypto prime broker Bequant and Global Digital Finance wants to create some best practices for decentralized finance (DeFi) in an effort to improve adoption while warding off burdensome regulations.“Over the years, [the crypto market has] gradually matured and I think DeFi just wants to go through the same evolution,” Denis Vinokourov, Bequant’s head of research and one of the working group’s chairs, told CoinDesk. Read more.
Welcome to IPO week. From Airbnb to DoorDash, many companies go public this week. Many look to the Airbnb IPO to asses the state of the travel sector, Airbnb’s IPO pricing of $44-$50 per share would, at the top of that range, give the company a market capitalisation of $29.8bn — a sharp improvement on the $18bn value implied at the time of its emergency pandemic funding.
Tuesday, Dec 8.
Kik (KIN) migration to Solana blockchain:
“On May 22 the Kik team, in collaboration with the Solana team, put forth a public proposal to the Kin Ecosystem for Kin to migrate to the Solana blockchain. That proposal outlined that in Kik’s view, Solana was the best option to support the increased scale of the Kin Ecosystem.”
Thursday, Dec 10.
Elf (ELF) mainnet launch:
Mainnets are generally considered to be a bullish fundamental catalyst. Elf’s testnet has been running smoothly for two years and has achieved all features required for the mainnet launch on Thursday.
US Consumer Price Index (ex. Food and Energy):
The CPI reading will give us a better understanding of inflation (the rate of growth in the economy). Consensus is 0.1% MoM and 1.8% YoY.
Saturday, Dec 12.
SPARK distribution for $XRP holders:
This airdrop has almost certainly contributed to recent bullish price action on XRP pairs. Stay cautious because of the ‘buy the rumor, sell the news’ meme, it’s hard to know what price will do after the distribution. This airdrop will be supported by all major exchanges.
The Market Won’t Give You Money. That’s Why It’s Called Taking Profit…
Market Meditators, we have been presented with so much opportunity in cryptocurrency in 2020. We need not look much further than bitcoin to see this potential. Even when you have a winning trade, there are still plenty of things to be aware of. Taking partial profit is a key one. It’s also important to manage your emotions after you take profit. Let’s explore this in more detail so we go into 2021 with even more success and wealth.
Taking profit is usually a positive experience. Unless of course the market continues to move in the direction of your trade. You may be inclined to let your emotions get the better of you: this may colour your current thinking and can be a strong feeling indeed. Do remember that you took profit based on your trading plan and that the alternative is usually not taking profit at all, which leaves you exposed to continued market risk.
When you take profit, be sure to celebrate that. Whether it was based on a technical level or a market event, you spotted a trading opportunity and reaped the benefits. Enjoy you have something to show for it. Do not get greedy. Keep your gains in perspective and remember the market is not there to give you money, that’s why it’s called taking profit.
Most importantly, avoid making irrational decisions after you’ve taken profit. The market may continue to move in the direction of your position and you may be tempted to re-enter. It may be a good strategy but you will need to objectively analyse the market first and remove any emotions lingering from the previous trade.
The same is true of suddenly taking a position in the opposite direction. For instance, if you were short a coin and you saw the price crash way down, you might be tempted to go long at this lower level. Again, it could be a good trade but don’t just do it for the sake of it and whilst on the euphoria from winning the last trade! Remember it is an entirely different position and so will need you to reassess the market again. It is an independent trade, treat it as such.
The cryptomarket has so much to offer. Create the right habits to make sure you make the most of it. Every single time. Wondering how to do that? Well, we’ve got you covered in these sections of the letter.
Disclaimer: The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. I am not a financial advisor. Every investment and trading move involves risk. Do your own research when making a decision.