XRP, one of the most notable cryptocurrencies in the market, has encountered a period of sharp volatility. After reaching an impressive yearly high in early December, the token has since dropped by nearly 18%, leading many traders to reassess their outlook. However, some market participants are still holding on to hope for a potential rebound. This optimism could soon face a challenge, particularly if Bitcoin’s dominance continues to rise. According to crypto analysts, this dominance may lead to a shift in capital from altcoins like XRP back into Bitcoin, which could create significant risks for those holding leveraged positions in XRP.
Bitcoin’s market dominance has been gradually climbing, now hovering at around 55%. This has been a significant shift from recent weeks, where Bitcoin’s dominance was slightly lower. While the current levels are noteworthy, some analysts believe that Bitcoin could still rise in dominance, potentially reaching between 60% and 70%. Such a rise would likely spur a major rotation of capital, moving from altcoins back to Bitcoin.
Pav Hundal, lead analyst at Swyftx, voiced concern over the impact this could have on XRP’s market performance. “If Bitcoin dominance continues to rise, it will likely push XRP to the sidelines,” Hundal stated. “Highly leveraged XRP traders could face a serious risk of liquidations, leading to a potential ‘bloodbath’ in the market.”
Hundal emphasized that the increasing dominance of Bitcoin may lead to a shift in focus. As Bitcoin continues to gain market strength, altcoins like XRP could experience significant sell-offs, especially if market sentiment turns in favor of Bitcoin’s supremacy.
Despite XRP’s recent decline, interest in the token remains strong, especially among retail traders. One of the most notable trends in the XRP market is the rapid growth of leveraged long positions. Open interest, which refers to the total number of outstanding derivative contracts, has surged to levels nearly double what was seen in the previous bull market in 2021.
Hundal observed that there seems to be a “thirst” for long positions in XRP, with traders continuing to increase their exposure even as the price retraces. “I’ve noticed a steady reload of long positions in XRP, even as prices move lower,” he explained. This behavior has become increasingly risky as the market appears to be entering what Hundal describes as “euphoria territory.”
In fact, if XRP’s price falls by just a few percentage points, it could lead to massive liquidations of long positions. For example, a 7% decline from the current price of $2.37 to around $2.18 could wipe out over $104 million in leveraged positions. This risk of significant losses is something traders should be aware of in the current market climate.
XRP’s rally earlier this year caught the attention of many in the crypto community. The token experienced an explosive surge, largely driven by a shift in market sentiment and external events. The price jumped by an astonishing 431%, from the range of $0.48 to $0.73 to a peak of $2.85 by early December. This sharp rise drives a frenzy of buying, with open interest reaching a record $3.44 billion—nearly $1.44 billion higher than the $2 billion open interest recorded in April 2021.
However, this surge has raised concerns about the sustainability of such growth. Hundal pointed out that this massive rally could be leading the market into a speculative bubble. “Traders are pushing the limits of euphoria, and it’s important to remember that this level of speculative trading is fragile,” he said.
For XRP to regain momentum, it needs to break through key resistance levels. While the potential for upward movement exists, particularly if Bitcoin stabilizes and the broader altcoin market shows renewed interest, the risks are high. A continued shift toward Bitcoin dominance could undermine XRP’s progress, pushing its price down even further.
If Bitcoin remains strong, Hundal suggested that it could “soothe market nerves” and help stabilize XRP’s performance. However, the growing dominance of Bitcoin over the altcoin market continues to pose challenges for tokens like XRP.
As the market evolves, traders and investors should stay alert to the changing dynamics. The potential for a shift in dominance from altcoins to Bitcoin could reshape the landscape, making it crucial for XRP holders to closely monitor market developments.
Steven is an explorer by heart – both in the physical and the digital realm. A traveler, Steven continues to visit new places throughout the year in the physical world, while in the digital realm has been instrumental in a number of Kickstarter projects. Technology attracts Steven and through his business acumen has gained financial profits as well as fame in his business niche. Send a tip to: 0x200294f120Cd883DE8f565a5D0C9a1EE4FB1b4E9
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