Ripple Price Analysis – The end of prolonged consolidation

Ripple (XRP) has exploded over the past week, in the setting of a seemingly ever expanding cryptocurrency industry. Having exceeded a US$79 billion market cap, with US$6.44 billion traded over the past 24 hours, XRP has taken the second spot in the BNC market cap table.

XRP is a distributed but centralized cryptocurrency and does not use Proof of Work (PoW) or Proof of Stake (PoS), but instead uses an algorithm referred to as consensus. There are no available mining statistics, but transactions statistics show a steady average of 1 million transactions a day, most of which represent the offer create function. These metrics rose significantly in late September after a year of decline.

There are nearly 100 billion XRP in existence, 55 billion of which were recently escrowed to allow for a controlled release which mimics a PoW disinflationary distribution. This has also assuaged concerns for many regarding the large proportion of XRP held by the Ripple team.

While XRP aims to disrupt the remittance and cross-border payment industry, the main goal is to take on SWIFT, a telecom cooperative created 44 years ago that is currently used to send secure financial messages between banks. These messages exclude clearing or settlement.

SWIFT is used by over 11,000 financial institutions in more than 200 countries and territories where these institutions exchange an average of over 15 million messages per day. SWIFT currently clears messages in four days.

XRP is designed to clear messages similar to that of SWIFT, which could also include transactions, in seconds. XRP has announced several banking partnerships, most recently with Korean and Japanese banks to help facilitate cross-border payments.

In late November, Ripple announced the addition of Benjamin Lawsky as CFO. Lawsky previously worked in New York as the Superintendent of Financial Services where he was instrumental in the formation of the BitLicense, a controversial business license seen by many as overburdensome regulation for virtual currency related business. Most Bitcoin-related companies in New York subsequently left, while Coinbase, Circle, and Ripple Labs have been granted a BitLicense.

XRP exchange-traded volume has been led by South Korean Won (KRW) and Bitcoin (BTC) markets over the past 24 hours, with most of that volume coming from Bithumb. Poloniex and Bitfinex account for the highest volume in the BTC and US Dollar pairs respectively.

Technical Analysis

While traders normally use the chart with the highest volume exchange, the XRP/USDT chart has the most available data history.

For the past few months, XRP has been bound in a triangle consolidation pattern, which held a bullish bias, with a 1.618 fib extension and a measured move of ~US$0.694 and ~US$.0815 respectively. The price of XRP held above the 100EMA on the two day timeframe, effectively the 200EMA on the one day timeframe, reinforcing this bias.

XRP currently resides in a measured zone of resistance, as predicted by the pattern which broke on the 209th day of consolidation. This break on bullish continuation was very similar to that of Ethereum and Bitcoin.

A Point and Figure chart using Wyckoff count math yields a ~US$1.41 target (Values were adjusted by a factor of 100). Point and Figure is a charting system that uses price action instead of time frames. Wyckoff count math allows the target to be determined by the high and low of the range as well as the time spent consolidating.

The Ichimoku Cloud on the daily chart, using singled settings (10/30/60/30) for faster signals or doubled settings (20/60/120/30) for more accurate signals, shows all bullish metrics. Due to the duration of the ranging consolidation, the Cloud was very poor at determining a true entry, long or short. When the triangle pattern did break, Cloud signals were bullish on the doubled settings, but would have been difficult to rely on in isolation.

The Ichimoku Cloud on the thirty minute chart, using doubled settings, shows strong trend continuation with two Kijun bounces (yellow) or mean reversion points. The indicator signaled a long entry below US$0.25 with no exit signal, or bearish TK cross, thus far.

For the XRP/BTC pair, the Ichimoku Cloud on the daily chart using singled settings indicated the end of a long downtrend yesterday with a Kumo breakout. Price currently remains above the Cloud, but Cloud remains bearish with the Lagging Span below Cloud. A long entry on this pair does not trigger until those conditions flip bullish.

The Ichimoku Cloud on the daily chart using doubled settings indicated the end of a long downtrend yesterday with a Kumo breach. This triggered an Edge to Edge trade where price breaks one resistance level and reaches for the next immediate level. These don’t often happen in one candle. Remaining Cloud metrics are far from bullish, suggesting a long entry is not currently warranted.

The ability for the Ichimoku Cloud using doubled settings to predict the upper price resistance is a key point of difference between the doubled and singled settings. Traders will use both when determining entries, but may prefer to use doubled settings for exits, especially when an Edge to Edge trade is active.

Lastly, despite the tremendous bullish strength, price remains bound within a previous price channel as illustrated by a Pitchfork. This indicator projects a diagonal trend using three anchor points. The red Median Line (ML) represents the mean of the trend while the top and bottom zones represent overbought or oversold territory, respectively.

Despite briefly invalidating the downtrending Pitchfork, the price has quickly returned to the ML, over the past week. When price swiftly breaks through the ML without consolidation, a retest of the ML before continuation is typical. The trend remains bearish until the price is able to close above this downward channel.

Conclusion

A planned reduction in available supply has spurred interest and a rise in price as intended. However, it is difficult to understand whether this solely represents a reaction to supply shock or a matter of pure speculation in light of the surrounding cryptocurrency marketplace. A coin high on the market cap list under US$0.25 will naturally attract the attention of new investors as it appears cheap. There is also speculation that Ripple may be added to Coinbase, with a potential announcement coming on December 15th.

Technicals on the USDT pair suggest a price move reacting to the end of prolonged consolidation, with a target well North of $US1 parity. The BTC pair shows a downtrend nearing a potential end, with the beginning of an uptrend around the corner.