XRP rebounds 40% amid short-position liquidations

In 24 hours, XRP’s market value rose by 52%, before settling roughly 40% above the previous day’s level. The price spike was driven by the liquidation of margin positions on the futures market.

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

XRP/USD Bitstamp hourly chart from TradingView.

XRP faced contract liquidations on December 23. During a broad cryptocurrency market correction, the token’s price fell more than Bitcoin and Ethereum.

The drop in XRP price was exacerbated by fundamental factors — the day before, the U.S. Securities and Exchange Commission filed a suit against Ripple and two of its executives.

The subsequent sell-off pushed XRP down to $0.2138. The sharp decline led to a significant imbalance in favor of short orders, and on December 25 a short squeeze occurred.

Data: Bybt.

Over 24 hours, short positions on XRP worth $73.5 million were liquidated.

Earlier, some analysts noted a high likelihood of a short squeeze.

XRP probably goes up.

Is it prudent to short something after such a big drop with the news already out?

Not sure what the bull case is really and wouldn’t touch it but also wouldn’t try and milk much more on a short.

Coinbase delisting might be final hit if that happens.

— CryptoISO (@crypto_iso) December 24, 2020

«XRP could rise. Is it prudent to go short after such a significant drop? I’m not sure the bullish scenario will play out, but I wouldn’t try to profit from a short either. A Coinbase delisting of XRP could be the final blow for Ripple if it happens.»

Short squeeze is a situation where the price of an asset falls or rises sharply and traders using leverage are unable to cover losses on margin positions. Due to mass liquidations, the price bounces in the opposite direction.

Earlier, Pantera Capital chief Dan Morehead was optimistic about the prospects for XRP and Ethereum.

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