Ripple Price Analysis – Trend reversal likely

Ripple (XRP) has broken out of its sideways consolidation, and retraced the entire breakout. The cryptocurrency’s market cap now stands at US$25 billion, third overall, largely based on its ~100 billion XRP supply.

Unlike most cryptocurrencies XRP does not use a Proof of Work or Proof of Stake consensus algorithm but instead uses consensus. For this reason, there are no available mining or staking statistics, but figures are available for transactions per day, which have declined since the beginning of 2017. Most of these transactions represent the OfferCreate function, or currency exchange.

The XRP conference, Swell, will be held on the 16th-18th in Toronto, Canada and will include keynotes from former FED chair Ben Bernanke and inventor of the World Wide Web Tim Berners-Lee. The conference will also be streamed live on the Ripple website.

The conference will also likely include an announcement regarding further mainstream bank adoption, possibly in Australia. Ripple recently gained a foothold in Mumbai, South Korea, and Singapore.

XRP aims to take on SWIFT, a telecom cooperative created 44 years ago which banks use to send secure financial messages, not clearing or settlement. SWIFT is used by over 11,000 financial institutions in more than 200 countries and territories. These institutions exchange an average of over 15 million messages per day. XRP is designed to clear these messages, which could also include transactions, in seconds. SWIFT currently clears messages in four days.

Expect a second conclusive announcement from XRP CEO Brad Garlinghouse regarding the 55 billion XRP Ripple the company is sitting on.

In May, Garlinghouse announced that the company would be placing the entire amount in escrow by the end of the 2017, releasing 1 billion XRP a month. Any unspent funds will be placed back in escrow. This assuages concerns from many speculators and investors regarding Ripple’s control of more than 50% of the total XRP supply.

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SWIFT

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Bitcoin

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Ripple

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Architecture

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Centralized

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Decentralized

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Distributed & Centralized

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Settlement Process

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Batches

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Proof of Work

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Consensus

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Speed

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2+ Business Days

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~10 minutes/confirmation

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3-6 seconds

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Current Volume

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15 million msgs/day

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~300,000 txns/day

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~1 million txs/day

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Currency

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Fiat

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Bitcoin

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All

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Transaction Cost

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Operator Fees

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Variable Mining Fee

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Variable Security Cost

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Despite XRP being a centralized distributed ledger, decreasing supply and increasing demand and adoption should be regarded as bullish long term.

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.

The Chinese Yuan (CNY) pair commands a negative premium compared to the index, suggesting sustained selling with a lack of demand. Conversely, the South Korean Won (KRW) pair holds a premium, suggesting sustained buying. In both cases, the differentials suggest difficulty with arbitrage in those countries.

Technical Analysis

When in trend limbo, as XRP currently is, entering a position for either direction is a high risk, high reward endeavor. Ichimoku Cloud, EMAs, Pitchforks, and Bollinger Bands help increase the likelihood of profitable trades through various confirmation signals and targets.

The Cloud on the daily chart, using singled settings (10/30/60/30) for quicker signals, continues to show neutral to bearish signals. A TK cross is currently forming, price is in Cloud, future Cloud is bearish, and Lagging Span is above price but below Cloud. A definitive long entry signal would trigger when all four metrics flip bullish.

A Kumo breakout will likely be the first metric to flip bullish, and would be considered an aggressive entry signal depending on volume. There is an opportunity for this through the Kumo twist, an area representing little to no resistance, on 19th-22nd. The likely target is 50% of the entire previous bear trend, or ~13.8k sats.

The Cloud on the daily chart, using doubled settings (20/60/120/30) for more accurate signals, shows nothing but bearish signals. However, there is an opportunity for an edge to edge trade, should a candle close within the Cloud.

This condition actually triggered a few days ago with the candle close in the Cloud but traders typically wait to enter this trade until after the TK cross flips bullish. The TK cross remains bearish. Targets for the edge to edge trade include all long flat ledges of the Cloud – 8k, 9k, and 13.8k sats.

The cloud on the four hour time frame shows price above the Cloud, bullish future Cloud, bullish TK, and Lagging Span in price but above Cloud. The long entry triggered on the Kumo breakout and TK cross on October 4th and 5th.

If the low holds, there may be a bearish TK cross followed by a bullish TK recross, a strong long re-entry signal. Due to the ranging nature of the price structure, Cloud signals on the four hour take a back seat to the singled Cloud on the daily.

The 50/200EMAs on the daily continue to display a bearish cross. A long entry signal would trigger on a bullish 50/200EMA cross, or Golden Cross.

The 50/200EMAs on the four hour chart crossed bullish a few days ago, the first such cross in many months. Infrequent, lower timeframe EMA crosses such as this are typically very successful at predicting trend shifts.

Pitchforks are useful for determining price projections as well as determining when a trend has ended. The median line (red) of the Pitchfork gives the expected mean of the trend. Price will continually attempt to return to this diagonal. A candle close outside of the Pitchfork invalidates the trend.

Each diagonal of the Pitchfork can be thought of as a potential reversal zone or support/resistance line. The upper yellow diagonal zone being ‘most overbought,’ or the top bounds of the trend, and lower yellow diagonal zone being ‘most oversold,’ or the bottom bounds of the trend.

Using a Pitchfork with slightly adjusted anchors, the previous bear trend has been invalidated, with several candle closes above the Pitchfork. The Pitchfork also appears to have been valid due to the nature of consolidation near the ML, as well as reversals in the upper and lower diagonal zones.

A new Pitchfork can be drawn using the current low as a third anchor point. This Pitchfork can easily be invalidated and should not be solely relied upon, but can give some idea as to the potential for the upcoming bull trend.

If the current low holds, expect price to reach for the ML after breaking diagonal resistance. The current diagonal zone also suggests oversold conditions based on the potential trend and can be seen as a buy signal.

Bollinger Bands (BBands) are a measure of volatility traders will use to decide when a large post-consolidation move will occur. The BBands have begun to flare out, suggesting a bullish resolution. Price has returned to the 20SMA (red) and found support.

Lastly, a low timeframe bear flag has formed on declining volume, a bearish continuation pattern. If the pattern resolves as expected, a breakdown to around 4k sats is possible.

Conclusion

With a large XRP conference in Toronto beginning next week, expect several announcements and partnerships to develop. Typically, markets buy the rumor and sell the news. For this reason, further bullish momentum leading into the conference is likely. After the dust settles, the bull trend will likely continue based on decreasing available supply and increasing worldwide demand, adoption, and awareness.

All the technicals presented above continue to support a trend reversal, albeit not definitive at this point in time. Ichimoku Cloud, EMAs, Pitchforks, and Bollinger Bands have begun to slowly flip bullish on high timeframes. Aggressive entries have likely already been made while traders requiring more confirmation will need at least a week or two before the trend shift becomes obvious. An immediate target of 13.8k sats is probable simply based on the 50% retracement level.