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XRP Price Analysis – Bearish momentum likely

Technicals on the XRP/USD and XRP/BTC pair sit in a bearish trend. The litmus tests for trend reversal include price position relative to both the 200EMA and the Cloud on the daily timeframe.

Ripple (XRP) is a payment protocol and network token which is currently ranked third on the Brave New Coin market cap table. Since November last year, Ethereum (ETH) and XRP have had similar market caps. The XRP market cap stands at US$12.84 billion, as calculated from a 41.43 billion free float supply. There has been a total of US$538.19 million in trade volume over the past 24 hours. Over the past month, XRP has underperformed most large and medium cap coins and assets (chart below).

XRP Price Analysis 15 Mar 2019 (1)
Source: Coin360.io

XRP was created on November 2012 by three founders; Arthur Britto, Chris Larsen, and Jed McCaleb, in collaboration with Ryan Fugger who begun working on a payments protocol in 2004 called RipplePay. The sourced code project was incorporated in September 2012 under the name NewCoin . NewCoin rebranded to OpenCoin in October 2012, and then the name changed again to Ripple Labs in September 2013. McCaleb resigned in May 2013, officially leaving the project in July 2013, and went on to create Stellar (XLM) in July 2014. McCaleb previously founded the MT GOX exchange in 2010, which was sold to Mark Karpeles in March 2011.

Brad Garlinghouse has been the Ripple Labs CEO since 2015, with David Schwartz serving as CTO since July 2018. Schwartz joined Ripple Labs in 2011 as chief cryptographer. Earlier this year, Stuart Alderoty, who had previously worked at CIT bank, HSBC, and American Express, joined Ripple as general counsel. Last month, Cory Johnson, previously Chief Market Strategist, was removed from the Ripple website, with Ripple stating that "due to changes in market conditions, we’ve chosen to eliminate the role."

Initially, 100 billion XRP were minted by the founders, with 80% of that supply held by the currently branded Ripple Labs, which is also known as "Ripple." In May 2015, the U.S. Treasury’s Financial Crimes Enforcement Network determined that Ripple Labs was "administrator" of the XRP tokens and levied the company with a fine of US$700,000 for failing to register as a money service business.

Currently, the top 100 largest XRP accounts, excluding escrowed XRP, hold 78.49% of the total circulating supply. Ripple holds 6.48 billion XRP, with 41.2 billion XRP in circulation and 52.3 XRP billion currently in held escrow.

In December 2017, Ripple announced a programmatic escrow system for the remaining 55 billion XRP held by the company at that time. Each month, one billion XRP are unlocked from escrow and offered for sale to any XRP customer. Any unsold XRP is then placed back in escrow at the end of the month. Ripple’s Q4 quarterly report revealed that 0.6 billion of the three billion XRP released from escrow over the quarter had been purchased on the open market, up from 0.4 billion sold in the previous quarter.

The gorilla in the room continues to be whether or not XRP represents an unregistered security. Ripple initially created, escrows, owns a majority of, and continues to control the majority flow of XRP tokens. Ripple argues that 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 Labs 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.

For consensus, the XRP network uses The Ripple Protocol Consensus Algorithm, which aggregates collectively-trusted subnetworks of nodes and validators. There are currently 1086 public nodes with only 26% of nodes running the most recent version, 1.2.0. The network also has 118 validators, most of which have an anonymous domain, with non-Ripple validators accounting for 73% of the total. As of November 2018, a Ripple server required ~12GB of data storage per day and 8.4TB to store the full history of the XRP ledger. However, a full node is not required to participate in the network and nodes can prune the ledger to free disk space.

Ripple offers a suite of tools for enterprise and banking solutions, collectively known as RippleNet, including; xCurrent, xRapid, and xVia. xCurrent processes global bank to bank payments for customers and is analogous to SWIFT. xRapid, which went live in October 2018, sources on-demand liquidity through buying and selling XRP. xVia can be used to send unidirectional payments. Of the three tools, only xRapid requires the use of the XRP token. Last month, Mastercard and Barclays announced investments in SendFriend, a company using xRapid for remittances, primarily between the Philippines and United States.

Ripple also has two other monetary arms to foster the growth of the ecosystem, a venture capital arm and a university research initiative. The venture capital arm, Xpring, invests in, incubates, acquires, and provides grants to companies and projects run by proven entrepreneurs. The research initiative has US$50 million in funding reserved for grassroots research and development related to XRP.

Last month, Xpring announced funding for Wietse Wind’s XRPL Labs, a company formed in October 2018 by Wind, Tristan van de Kamp, and Ali Mohammadlo. Wind had previously developed the XRP tip bot, released in December 2017. Upcoming XRPL projects will include a signing app, cold storage, and a decentralized exchange user interface. Earlier this month, XRPL also announced a bounty to bring an XRP payment plugin to WooCommerce’s Online Stores.

Earlier this week, Xpring partnered with Forte to form a US$100 million fund supporting game developers. Forte is a blockchain-based platform technology for the games industry, whose backers include a16z crypto, Andreessen Horowitz, Battery Ventures, Canaan Partners, Coinbase Ventures, 1confirmation, and others. In-game or in-app transactions and purchases are becoming commonplace in video games with the popular game Fortnite earning well over US$1 billion in revenue last year.

The external XRP ecosystem includes Interledger, Coil, and Codius, all of which are related in terms of functions and development teams. The Interledger Protocol (ILP) is capable of sending payments across different distributed and decentralized ledgers, and moves funds via intermediaries. 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. A similar micropayment system for content monetization is used by the Brave browser. Codius is a smart contract and smart program platform allowing for interoperability between blockchains. In November 2018, the Bill & Melinda Gates Foundation announced plans to use ILP and Coil, in conjunction with Mojaloop, to bring payments to the under and unbanked.

On the network side, transactions per day declined throughout most of 2018, as reported by Ripple, and have been ranging between 400,000 and 800,000 since the beginning of the year. However, neither coinmetrics.io nor bitinforcharts.com agrees with this data. Most of these transactions are generated by the OfferCreate function, a currency exchange facility. The average transaction fee to send XRP, which correlates with network traffic, has been minimal when compared to other coins, and is currently around US$0.0004 (not shown).

XRP Price Analysis 15 Mar 2019 (2)
Source: https://xrpcharts.ripple.com/#/metrics

Daily active addresses (DAA) have also decreased substantially since January 2018 (line, chart below) and have been ranging between 4,000-8,000 since July 2018. DAA currently remain above the 2017 average. A large uptick in DAA should be seen as a bullish indicator for price, as it suggests increasing demand for the asset. The largest increases in DAA have come in mid and late 2017, corresponding to large increases in price.

The average transaction value (fill, chart below) on the network has essentially held between US$120 and US$500 since March 2018. Due to monthly escrow transactions, these values are likely slightly higher than actual organic usage. As total transactions per day have declined, these larger escrow transactions have had a more significant impact on the average transaction value per day.

XRP Price Analysis 15 Mar 2019 (3)
Source: coinmetrics.io

The 30-day Kalichkin network value to estimated on-chain daily transaction ratio (NVT) is currently above 100, a historical norm (line, chart below). A rising NVT should be considered bearish for price as it suggests declining network utility. Escrow transactions or coin arbitrage will falsely skew NVT significantly lower. A sharp decline in NVT below 100 would suggest bullish price action (fill, chart below), similar to December and January 2018. 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. For example, XLM, which uses a similar network structure to XRP, has a much higher NVT.

XRP Price Analysis 15 Mar 2019 (4)
Source: coinmetrics.io

Turning to developer activity, the Ripple project has 75 GitHub repos with over 150 developers contributing a cumulative 1,100 commits over the past year. Ripple version 1.2.0 was released last month. Most of the XRP related commits occurred in the Ripple dev portal (top) while the rippled repo has seen very few commits over the past few months (bottom).

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," which save a record of what changes were made, when, and by who. Although commits represent quantity and not necessarily quality, a higher number of commits can signify higher dev activity and interest.

XRP Price Analysis 15 Mar 2019 (5)
Source: https://github.com/ripple/ripple-dev-portal/graphs/contributors

XRP Price Analysis 15 Mar 2019 (6)
Source: https://github.com/ripple/rippled/graphs/contributors

XRP exchange traded volume over the past 24 hours has been led by the Tether (USDT) and Bitcoin (BTC) pairs. The majority of trading has occurred on BCEX and HitBTC. Both KRW and JPY volume hold a significantly higher percentage of volume than most other coins.

XRP had a slurry of custody and exchange-related announcements towards the end of 2018 and the beginning of 2019. In November, OKEx opened the XRP/BTC pair for margin trading and the Trezor Model T hardware wallet announced support for XRP storage. In December, XRP pairs were listed on Coinbene and KuCoin, while Binance listed several XRP base pairs. In January, OKEx added an XRP perpetual swap with 40x leverage and the exchange Bitrue also added several XRP base pairs. Bitcoinus, the Gibraltar Blockchain Exchange, BigOne, Biger, LykkeX, ProBit, and BankCEX also added XRP pairs in December and January. Coinbase listed XRP pairs late last month and added XRP to the Coinbase wallet this week. Fidelity Digital Assets may also list XRP pairs later this year.

XRP Price Analysis 15 Mar 2019 (7)

Aside from a brief period between December 2017 and February 2018, Google Trends for the term "Ripple" has mostly been pinned to the floor. The increase in searches likely signaled a large swath of new market participants at that time. A 2015 study found a strong correlation between the google trends data and bitcoin price, while a 2017 study concluded that when the U.S. Google "bitcoin" searches increase dramatically, bitcoin price drops.

XRP Price Analysis 15 Mar 2019 (8)

Technical Analysis

XRP has been trading in a tight range over the past few weeks, which is indicative of consolidation before a larger move. To determine entries and exits throughout a trend exponential moving averages (EMAs), Volume Profile (VPVR), Pitchforks (PFs), and the Ichimoku Cloud can be used. Further background information on the technical analysis discussed below can be found here.

On the daily chart, the 50 and 200 day EMAs have been bearishly crossed since May 21st. XRP is currently far below the 200EMA and sitting just below the 50EMA. A break of the 50EMA resistance would suggest a push toward the 200EMA at US$0.385. A bullish Golden Cross is not likely to occur for several months, but it would suggest further upside strength and a definitive trend reversal. There are no active volume or RSI divergences at this time.

The VPVR from 2017 shows that much of the volume has occurred in the US$0.14-US$0.25 range. The volume profile also shows relatively little volume above US$0.54. Since September last year, price has been held within a triangular range. Falling below the triangle support suggests a minimal target of US$0.24. Long/short open interest (top panel, chart below) on Bitfinex is currently 85% long, with longs rising significantly since late January. A significant price movement downwards will result in an exaggerated move as the long positions will begin to unwind. This is known as a "long squeeze."

XRP Price Analysis 15 Mar 2019 (9)

A potential bearish PF, with anchor points in December and April, encapsulates the range of the current downtrend. The lower bounds of support represent a buy zone whereas the upper bounds of the resistance represent a sell zone. The lower support diagonal also matches the 2017 triangular consolidation zone. Price will continually attempt to return to the median line (yellow) throughout the duration of the trend. The trend will remain bearish until price rises above the entire PF, currently above US$0.533.

XRP Price Analysis 15 Mar 2019 (10)

Turning to the Ichimoku Cloud, there are four key 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. Trades are typically opened when most of the signals flip from bearish to bullish, or vice versa.

On the daily chart, Cloud metrics are bearish; the spot price is below the Cloud, the Cloud is bearish, the TK cross is newly bearish, and the Lagging Span is below the Cloud and below the spot price. A traditional long entry triggers when price is once again above the Cloud, which only happened once in mid-November 2018. The flat kumo at US$0.422 and US$0.51 represent a magnet for price if the current lows are not breached.

XRP Price Analysis 15 Mar 2019 (11)

The XRP/BTC pair on the daily chart shows the beginning of a bearish trend. An approaching bearish Kumo breakout with a 50/200EMA Death Cross suggest bearish momentum on the horizon. Price is also newly below the Cloud for the first time since November. VPVR shows some support from the 7,000-9,000 sat zone suggesting price is unlikely to fall lower without significant bearish strength. The stronger support sits at the 4,300 to 5,000 sat zone.

XRP Price Analysis 15 Mar 2019 (12)

Conclusion

Fundamentals continue to show low network use and relatively high average transaction values with nearly zero fees. It remains difficult or impossible to determine if this represents institutional use or is purely speculation, with transfers between exchanges and user wallets, as well as large monthly escrow transactions which inflate average transaction values. RippleNet has yet to convert a large degree of continuous high volume on-chain network traffic. xRapid’s buying and immediate selling of the XRP token is not a net gain for demand in and of itself. The most bullish price action over the past few months has been strictly related to news announcements and not sustainable organic growth as evidenced by the low transactions per day.

Technicals on the XRP/USD and XRP/BTC pair sit in a bearish trend. The litmus tests for trend reversal include price position relative to both the 200EMA and the Cloud on the daily timeframe. A breach of US$0.51 on high volume would likely meet these requirements. Otherwise, bearish continuation towards US$0.025 and 7,000 sats remains likely in the near term. With a Coinbase listing announcement in the rearview, there are very few potential bullish announcements in the near future. Being declared a security by the U.S. SEC remains potentially a significant bearish event.


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