XRP Price Analysis – Trend remains heavily bearish

Ripple (XRP) has recovered strongly after a dropping to a low of US$0.25 on August 13th, but is down 92% from the all time high set in January. However, the market cap is still the third largest, at US$12.6 billion, with US$233 million in trading volume over the past 24 hours.

Until regulatory guidelines define decentralization, whether or not XRP is a security remains an open and relevant question for many. In a recent blog post, Ripple’s CTO David Schwartz said that the “XRP Ledger is in many ways a more transactional, functional and decentralized ledger than either Bitcoin or Ethereum, which will only increase over time.”

The class-action lawsuit alleging XRP was being sold as an unregistered security in a “never-ending initial coin offering” was withdrawn earlier this week. Two other such suits remain pending. Ripple CEO Brad Garlinghouse continues to state, “it’s very clear to me that Ripple is not a security.”

The suite of tools provided by Ripple Labs 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.

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

xRapid requires the use of XRP whereas xVia and xCurrent do not. Companies currently testing xRapid 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 partnerships can be found here.

In Q4 2017, Ripple locked up 55 billion XRP in escrow, one billion of which was to be released monthly for private sale or purposes deemed necessary by the Ripple company. Any unsold XRP is returned to escrow.

According to Ripple’s Q2 report the company sold US$73.53 million worth of XRP, US$56.66 million of which was sold “programmatically.” 300 million XRP out of the billion XRP removed from escrow were sold, to “help support the XRP ecosystem.” Schwartz has stated that the programmatic sales are not controlled by Ripple and the timing of the sales cannot be adjusted on a short-term basis.

Interest in the project can be gauged using Google Trends. Interest over the past year strongly correlates with the rise in XRP price, as is the case for most coins. 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. A high profile speaker will likely generate substantial buzz and headlines. Last year’s conference took place in Toronto and included speakers Ben Bernanke, former chairman of the Federal Reserve, and Tim Berners-Lee, inventor of the World Wide Web.

On the network side, transactions per day have steadily increased since late June, and are currently above 500,000. Transaction fees, which correlate with network traffic, have been minimal compared to other coins, and are currently around US$0.001 for each transaction. The network currently consists of 802 public nodes, while the top 100 largest XRP accounts hold 81% of the money supply. A recent attempt to sync a full node took six months and 8.5TB of data to download the full XRP transactional history.

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

The XRP project on GitHub has had a cumulative 240 commits over the past year. Most coins use the developer community of GitHub, where files are saved in folders called “repositories” or "repos," and changes to these files are recorded with “commits.” Although commits represent quantity and not necessarily quality, a higher number of commits can signify higher dev activity.

Exchange-traded volume has been led by the Tether (USDT) and Bitcoin (BTC) 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, Bitfinex, and Binance. Bittrex recently added an XRP/USD fiat pair, while a Coinbase listing still remains elusive.

Technical Analysis

The XRP trend remains heavily bearish; however, opportune traders can look for highly probable counter trend trades. These trades, as well as any trend reversal, can be spotted with Ichimoku Cloud, exponential moving averages (EMAs), Pitchforks, and chart patterns. Further background information on the technical analysis discussed below can be found here.

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$1.79 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$0.588, which would also represent an optimal short entry target for a bearish Kijun Bounce. If breached, a bullish TK cross will likely result shortly thereafter, followed by the ascent to US$1.79. This price target is likely months away.

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$0.389 is possible as 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.

On the daily chart, there continues to be a bearish 50/200EMA cross with price drifting its farthest from the 200EMA since April. Price also remains bound to a bearish Pitchfork (PF) with anchor points in December and April, recently returning to the median line (yellow). A candle close above the PF will invalidate the bearish trend.

On the four hour chart, price structure and descending volume have created a pennant, a bullish continuation pattern. The structure has a measured move and 1.618 fib extension of US$0.44. A break above volumetric resistance at US$0.34 should bring additional bullish momentum and confirm the resolution of this pattern.

The XRP/BTC pair also shows a sustained bear trend on the daily chart with a bullish pennant. If the pennant resolves North as expected, a pit stop or reversal at 6000 sats is likely due to Kijun resistance. A traditional long entry will not occur until price is above Cloud, which may or may not occur after a bullish Kumo twist.

Conclusion

Ripple and XRP continue to grapple with proving it’s degree of decentralization in the court of public opinion as well as against class-action lawsuits. Regulators have been mum regarding the issue, which may be why Ripple wanted former president Bill Clinton to speak at the next Swell conference.

Although Ripple argues that XRP would continue to run if the company ceased to exist, Ripple’s control of most of the XRP supply, systematic selling of that supply to support Ripple the business, and a lack of incentive and heavy burden to run an XRP node suggest otherwise.

Technicals continue to suggest a bear trend with the possibility of a relief rally resulting in mean reversion. A high timeframe target near US$0.60 would require significant bullish momentum but is a likely target based on the two-day Kijun and daily 200EMA. A near term bullish reversal trade is also probable with a target near US$0.45, returning price to a previous consolidation zone.

Ripple and XRP continue to grapple with proving it’s degree of decentralization in the court of public opinion as well as against class-action lawsuits. Regulators have been mum regarding the issue, which may be why Ripple wanted former president Bill Clinton to speak at the next Swell conference.