XRP Price Analysis – An active bear trend with weakening momentum

Ripple (XRP) has declined by 40% since the beginning of June, is currently near it’s lowest price since December 2017, and is down 89% from it’s all time high. The market cap now stands at US$44.35 billion (based on the total supply), with US$228.46 million in trading volume over the past 24 hours.

There is ongoing discussion regarding XRP, the currency, and Ripple, the company. XRP was historically the ticker symbol for the cryptographic asset called Ripples. In an effort to reduce confusion, Ripples has been replaced by the ticker, and the newly named XRP has a redesigned logo.

Ripple, the company, was recently hit with a third lawsuit alleging XRP was being sold as an unregistered security. The complaint alleges that the XRP token had “all the traditional hallmarks of a security” and Ripple, the company, has frequently highlighted a profit motive from XRP ownership. Other suits claim that the sale of XRP is a “never-ending initial coin offering.”

Ripple Labs CEO Brad Garlinghouse has said, “I think it’s very clear that XRP is not a security, it exists independent of Ripple the company.” However, Ripple owns about 60% of XRP, according to Garlinghouse. The U.S. Securities and Exchange Commission has given a positive decision on BTC and ETH, but has yet to issue any guidance on XRP, leading to speculation that XRP may be hit with a penalty.

Ripple recently announced a venture capital arm, Xpring, that will “invest in, incubate, acquire and provide grants to companies and projects run by proven entrepreneurs.” According to the website, they are already “evaluating a pipeline of more than 100 companies and projects.”

Ripple is also targeting India as an emerging market for new users, having already partnered with three Indian banks; Axis Bank, YES Bank, and Kotak Mahindra Bank. Ripple vice president Asheesh Birla said that Ripple has entertained thoughts of a massive airdrop to the people of India, while she was at the recent Scaling and Digital Disruption in Fintech conference.

Ultimately, Ripple has decided to target Indian mobile phone providers instead. According to Birla, “in the next five years, one billion people will become banked in India, but they’ll be banked through their phone.”

On June 27th, the CEO of the State Bank of India (SBI) Group and chairman of SBI Holding, Yoshitaka Kitao, said that he felt, “Ripple [is] the only company that has delivered battle-tested enterprise solutions and global bank customer traction, including commercial deals with top banks already signed in Asia Pacific.”

Kitao was likely referring to the suite of tools provided by Ripple Labs, including; xCurrent, which processes global bank to bank payments for customers and is analogous to SWIFT; xRapid, which sources on-demand liquidity; and xVia, which plugs into RippleNet to send unidirectional payments.

xRapid requires the use of XRP whereas xVia and xCurrent do not. Companies currently testing xRapid for use include; MoneyGram, Currencies Direct, Mercury FX, Western Union, IDT, Cambridge Global Payments, and Viamericas. Companies Using xRapid include;  SBI Virtual Currencies, Cuallix, and Zip Remit. The full list of Ripple’s partnerships can be found here.

On the network side, transactions per day have decreased to ~600,000, which equates to 8.83 transactions per second. Transaction fees, which correlate with network traffic, have been minimal compared to other coins, and are currently around US$0.0011 for each transaction.

The network currently consists of 732 public nodes, while the top 100 largest XRP accounts hold 81% of the money supply. In an effort to further distance itself from controlling the ledger, Ripple has announced the addition of four third-party validators; BahnhofAB (Sweden), FlagshipSG (U.S., Florida), Telindustelecom (Luxembourg), and WorldLinkUS (U.S., Texas).

Kalichkin’s 30-day network value to estimated on-chain daily transaction ratio (NVT) rose from April 2018 to mid-May 2018 and has begun to decrease. Inflection points in NVT can be a leading indicator for future price action. NVT has also recently turned lower, showing evidence for an uptick in transactional value and utility. Although NVT is difficult to compare between coins, which use different transactions types, it can be useful when comparing a networks relative utility over time.

Exchange-traded volume has been led by the Bitcoin (BTC) and Tether (USDT) pairs with the Japanese Yen (JPY) and Korean Won (KRW) pairs not far behind. Since January 2018, USDT has steadily continued to gain a percentage of overall volume. The majority of trading has occurred on Bitbank, Hitbtc, and Binance.

Technical Analysis

Ripple stands on thin ice from a technical perspective, but continues to fall on less and less volume. A strong reversal or a slow bleed may be equally probable. To prepare for both outcomes, indicators such as Exponential Moving Averages, chart patterns, Bollinger Bands, Ichimoku Cloud, and Pitchforks can be used to plan a road map. Further background information on the technical analysis discussed below can be found here.

On the two-day chart, the 50/200 Exponential Moving Averages (EMAs) have tightly constrained the price of XRP over the past few months, which has also been the case with Bitcoin. A bearish 50/200EMA cross on this time frame would likely result in a significant pullback to the previous consolidation zone around US$0.20. A clean break of the 50EMA on high volume would suggest a retest of resistance levels near the all time high, around US$3.

The two-day chart also had a multi-month head and shoulders chart pattern, a bullish reversal setup, which has recently been invalidated. The hallmarks of this bullish reversal pattern include a descending volume profile and a series of three extreme lows, with the second low exceeding the first and third low. Not only did price fail to reach the neckline, but the low of the right shoulder has been breached. The volume profile continues to show a descending trend.

On the daily chart, there continues to be a bearish 50/200EMA cross with price drifting its farthest from the 200EMA since April. Open interest on Bitfinex is heavily net long, with longs near record highs (top panel, chart below).

On the daily chart, Bollinger Bands (BBands) are showing a break through the lower band, suggesting further downside. BBands measure volatility and attempt to predict the direction of price action as consolidation is occurring. If a break out occurs while price is below the 20SMA, the indicator suggests the beginning of a bear trend. The BBands expand with volatility, after the move has happened. The two previous down moves this year occurred with similar compression of the BBands.

The Ichimoku Cloud metrics on the two-day time frame are heavily bearish; price is below Cloud, Cloud is bearish, TK cross is bearish, and Lagging Span is below Cloud and price. The Cloud uses four metrics; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, and the Lagging Span. The best entry always occurs when most of the signals flip from bearish to bullish, or vice versa.

Although metrics are clearly bearish, there are potential pathways to a US$1.73 target. The long flat Kumo represents a 50% retracement target for the high and low of the range. The longer XRP remains in a range without making a lower low, the higher the probability that this target will be reached.

The first key resistance level will be the Kijun at US$0.697, which would also represent an optimal short entry target for a Kijun Bounce. If breached, a bullish TK cross will likely result shortly thereafter and begin the ascent to US$1.73.

The Cloud metrics on the daily chart are essentially the same as the two-day chart, but price is much closer to the Cloud. A traditional long entry will not occur until price is above Cloud, which may or may not occur after a bullish Kumo twist. Based on the Cloud structure, a price touch of US$0.696 is possible so long as price does not make a lower low. The TK lines have also formed a C-clamp on both the daily and two day charts, suggesting oversold conditions.

Staying with the daily chart, price remains bound to a bearish Pitchfork (PF) with anchor points in December and February. Although this channel has previously been invalidated, a three month downtrend in with tight price structure gives credence to the PF extensions. If the support near US$0.38 does not hold, a touch of the median line and monthly support pivot at US$0.25 is likely.

Lastly, the daily XRP/BTC chart, all Cloud metrics are bearish with a bearish 50/200EMA cross. There is no bullish divergence. A long flat Kumo at 8,940 sats would be the bullish target if price does not make lower lows and reversal does occur.

Conclusion

Ripple, the company, continues to have many moving parts, including further implementations of enterprise solutions, distancing itself from the XRP token, and dealing with claims that the XRP token represents an unregistered security. To an outsider, the company and the token are so closely related it’s difficult to understand the differences. Ripple, the company, continues to hold a majority stake in the token. Efforts by Ripple/XRP, including a logo change and adding non-Ripple validators, suggest that Ripple is conscious of this problem.

Technicals suggest an active bear trend with weakening momentum, based on volume and RSI. Interim upside targets include US$0.70 with long-term upside targets of US$1.74. Downside targets show strong support between US$0.20-$0.25, but would likely require a sharp increase in volume to push price to those levels.

Ripple, the company, continues to have many moving parts, including further implementations of enterprise solutions, distancing itself from the XRP token, and dealing with claims that the XRP token represents an unregistered security. To an outsider, the company and the token are so closely related it’s difficult to understand the differences. Ripple, the company, continues to hold a majority stake in the token. Efforts by Ripple/XRP, including a logo change and adding non-Ripple validators, suggest that Ripple is conscious of this problem.