XRP Price Analysis – Continued bullish consolidation

Ripple (XRP) is up almost 200% over the past week on a series of bullish news announcements, but remains down 85% from ATH set in January. The market cap now stands at US$22.78 billion with US$1.38 billion in trade volume over the past 24 hours.

The suite of tools for enterprise and banking solutions called RippleNet, is now available in 40 countries. The tools are provided by the company behind XRP, Ripple Labs, and includes; 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, which is set to go live later this year, requires the use of XRP whereas xVia and xCurrent do not. This week, the financial services group PNC announced joining RippleNet, and will use xCurrent for cross-border payments.

A report by RBC capital markets in late June found that RippleNet processed transactions in 3-5 seconds, as opposed to multiple days when compared to traditional settlement procedures, and saved users 46% in costs.

Ripple also has two other monetary arms to foster the growth of the ecosystem. XPRING is a venture capital arm, which invests in, incubates, acquires, and provides grants to companies and projects run by proven entrepreneurs. Ripple’s university research initiative sets aside $50 million in funding for grassroots research and development.

The XRP ecosystem also includes Interledger, Coil, and Codius, all of which are related in terms of functions and development teams.

Launched in 2016, The Interledger Protocol (ILP) is capable of sending payments across different distributed and decentralized ledgers. ILP provides a top-layer cryptographic escrow system which moves funds via intermediaries.

Launched in May 2018, Coil enables subscription based donations for content monetization on the internet, without advertising or selling user data, and pays sites in real-time through a Web Monetization API. Coil went live with payment implementations for YouTube, Twitch, and Wikipedia on September 20th. The concept is similar to the micropayment system used by the Brave browser.

Launched in June 2018, Codius is a smart contract and smart program platform allowing for interoperability between blockchains. These smart contracts can hold any number of blockchain-based assets, collect information, and be written in any standard programming language.

While the company’s suite of products continues to expand, and the company being listed in LinkedIn’s 2018 top startups, there are ongoing legal troubles. Ripple’s general counsel, Brynly Llyr, left earlier this month, after working for the company for almost two years. Ripple subsequently settled a 2017 lawsuit with R3 for an undisclosed amount. There are also several ongoing lawsuits alleging that XRP was and continues to be sold as an unregistered security.

In the meantime, Ripple’s yearly conference, Swell, will take place on October 1st and 2nd in San Francisco and will include a keynote by former U.S. President Bill Clinton. The conference will likely provide additional announcements and momentum for continued global interest in the short term. General interest in XRP over the past year can be gauged using Google Trends. The data strongly correlates with the rise and fall in XRP price.

The network, which recently saw the release of version 1.1.0, consists of 899 public nodes. The top 100 largest XRP accounts hold 80% of the money supply. Among the 109 validators with 99% or greater consensus, 9% originate from the ripple.com domain and 52% have an unspecified domain.

While transactions per day decreased throughout late August and early September, they recently increased to ~400,000. Transaction fees, which correlate with network traffic, have been minimal compared to other coins, and are currently around US$0.001 for each transaction. Most of these transactions represent the OfferCreate function, or currency exchange.

Source: bitinfocharts.com

Kalichkin’s 30-day network value to estimated on-chain daily transaction ratio (NVT) has steadily increased (line, chart below) since mid-April, showing evidence of decreased 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.

Daily active addresses (DAA) have decreased substantially (fill, chart below) since January, although data over the past month is unable to be obtained. A large uptick in DAA should be seen as a bullish indicator of price, as it suggests an increase in demand.

Source: coinmetrics.io

Recent exchange traded volume has been led by the Bitcoin (BTC), Tether (USDT), and U.S. dollar (USD) pairs. The majority of trading has occurred on Upbit, binance, Bitbank, and Bithumb. OKCoin.com recently listed XRP/USD, XRP/BTC, and XRP/ETH pairs.

Technical Analysis

After a large price move new trends are often started and price enters a series of smaller consolidation periods. Bitfinex margin open interest is currently heavily net long on both the XRP/USD and XRP/BTC pairs.

To determine entries and exits, Ichimoku Cloud, exponential moving averages (EMAs), Pitchforks, divergences, Bollinger Bands, and Fibonacci retracements can be used. Further background information on the technical analysis discussed below can be found here.

There are four key metrics when looking at the Ichimoku Cloud; 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. Trades are typically opened when most of the signals flip from bearish to bullish, or vice versa.

On the two day chart, the Cloud metrics continue to lean bearish; price is below Cloud, Cloud is bearish, TK cross is bearish, and Lagging Span is above below Cloud and above price. The long flat Kumo at US$1.78, which should act as a magnet for price, represents a 50% retracement target for the high and low of the range.

Price will soon breach the Cloud and trigger an Edge to Edge long trade. These trades are considered trend reversal trades and trigger when price closes within the Cloud. The target for these trades is always the opposite edge of the Cloud. The stop loss for these trades triggers when price falls below the Kijun and/or Cloud.

On the daily chart, Cloud metrics are neutral to bullish; price is inside Cloud, Cloud recently flipped bullish, TK cross is bullish, and Lagging Span is inside Cloud and above price. A traditional long triggers with price above Cloud, the first since January. Once the daily Kumo breakout does occur, bids should be placed at or near the Kijun to catch any bullish support tests.

On the daily chart, there continues to be a bearish 50/200EMA cross with price above the 200EMA as of a few days ago. A bullish 50/200EMA cross would be the first since May. Price also exploded out of the bearish Pitchfork with anchor points in December and April, indicating invalidation of the bear trend. There are no active divergences on high timeframes (not shown).

On the hourly chart, Bollinger Bands (BBands) are tight and showing a bullish bias, suggesting further upside. There is also a potential bullish pennant forming with a measured move of ~US$0.90.

BBands measure volatility and attempt to predict the direction of price action as consolidation is occurring. If a break out occurs while price is above the 20SMA (green highlight), the indicator suggests bullish continuation. The BBands expand with volatility, after the move has happened. The two previous up moves on this time frame occurred with similar compression of the BBands.

Lastly, on the daily XRP/BTC chart, price has convincingly broken a strong downtrend after building a multi-month bullish RSI divergence (not shown). Fibonacci retracements suggest an eventual target near the 50% retracement from high to low around 13.5k sats. Lower time frames are also showing signs of bullish consolidation.

Conclusion

Fundamentals show an increasing push towards the widespread commercial use of xRapid, which requires the use of XRP. Ripple also continues to accrue banking partnerships globally, many of which have concluded using RippleNet saves substantial time and money. Related second layer services (Interledger, Coil, and Codius) are bearing the fruits of research and development with working advancements in micropayments.

The gorilla in the room continues to be whether or not XRP represents an unregistered security. Ripple has created, escrowed, owns a majority of, and continues to control the flow of XRP tokens. Ripple argues the network is decentralized because the XRP token does not represent shares of Ripple, the company, and the XRP network would continue to exist if Ripple did not. Several pending court cases, as well as clarity from the U.S. Securities and Exchange Commission, would clear any regulatory uncertainty surrounding the asset.

Technicals suggest continued bullish consolidation with impulse moves toward US$1.78. Any further upside would represent the first time price was above both the daily Cloud and the daily 200EMA since January, both of which represent litmus tests for bullish or bearish price sentiment.