Chart of the Day: XRP, Ripple Face Controversy, Risks
Pinchas Cohen | Dec 21, 2022 08:10AM ET
- XRP's centralization and involvement in scams have caused controversy within the cryptocurrency community
- The Securities and Exchange Commission (SEC) filed a lawsuit against Ripple Labs and its executives for allegedly selling $1.3 billion in unregistered security offerings
- Technically, XRP's supply and demand balance appears to be shifting, with potential for a significant price drop
- Entry: $0.35000
- Stop-Loss: $0.36000
- Risk: $0.01
- Target: $0.25000
- Reward: $0.1
- Risk-Reward Ratio: 1:10
The XRP cryptocurrency (Ripple) and Ripple Labs — the payment company that utilizes blockchain technology for financial institutions — have recently been the subject of controversy and potential risks.
First, Vitalik Buterin, the co-founder of Ethereum, has criticized XRP as being centralized. Buterin argues that to be considered part of the cryptocurrency space, a project must use cryptography and have a "chain data structure." Buterin has also previously criticized XRP for claiming that Bitcoin and Ethereum were Chinese-controlled assets and not apologizing. Ripple's Chief Technology Officer David Schwartz has disputed this claim, stating that Ripple is a company and XRP is a digital asset. The centralization of XRP has been a source of debate within the cryptocurrency community.
In addition to this controversy, XRP has also been targeted in scams. Wietse Wind, a developer of the XRP Ledger ecosystem, has warned about a new scam involving a fake website offering users the opportunity to participate in an "autonomous XRP staking trial program," which could result in the theft of tokens. There have also been other scams involving XRP staking, including fake emails supposedly from Binance inviting users to join such a program with the promise of high returns.
In related news, attorney Nicole Tatz has filed a Motion to Withdraw as Counsel for Ripple CEO Brad Garlinghouse in the ongoing lawsuit against Ripple. Tatz is departing from the law firm Cleary Gottlieb Steen & Hamilton LLP, representing Garlinghouse in the case. All other parties remain involved in the case. The lawsuit, filed by the Securities and Exchange Commission (SEC) in December 2020, alleges that Ripple Labs and two of its executives, including Garlinghouse and co-founder Christian Larsen, misled XRP investors by selling $1.3 billion in unregistered security offerings.
In April 2021, the two executives attempted to have the individual lawsuits against them dismissed. However, their motion was denied in March of this year. Motions for summary judgment in the case have been fully briefed, with the final submission being made, and Ripple is asking the judge to rule in its favor. The verdict is expected in early 2023, according to James K. Filan's prediction, and Garlinghouse expects the case to be resolved in the first half of 2023 without going to trial. Members of the XRP community are hoping for a favorable ruling.
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These issues highlight the potential risks and controversies surrounding the use of XRP and the involvement of Ripple in the cryptocurrency space. It is crucial for individuals to be aware of such risks and to thoroughly research and evaluate any opportunities or claims before participating in them. Let's study the supply and demand balance of the cryptocurrency as they appear on the chart.
The XRP/USD pair completed an H&S continuation pattern - a failed bottom attempt - when closing below the neckline, the trendline connecting the range's lows, on Dec 19. Yesterday, bulls attempted to push the price back above it but failed, and today it resumed falling from its trendline.
The 50 DMA is bearing down on the *falling* 200 DMA, the most bearish kind of Death Cross, demonstrating that current pricing is falling so rapidly, even gaining on the more extended pricing set, which is in decline. The last time there was a Death Cross (and also then it was with a falling 200 DMA) occurred on Dec. 31, 2021, at 0.82995. The price fell till Jan. 22, 2022, to 0.55200, a 33.5% drop. Then, the price rebounded, retesting the 200 DMA, jumping till Mar. 28 to 0.91125 high, a 65% increase, only to fall again 68.4% to 0.28757 on Jun. 18.
Moreover, XRP sets up a weekly death cross, demonstrating a confluence of a potential price-shift cataclysm.
Technicians measure the target based on the H&S height between its head and estimable breakout point: 0.55696 - 0.34680, implying an approximate 21,000 move to 0.13680.
The 50-week MA is breathing down the 200 WMA's neck. After stopping the bullish bottom attempt, the major MA demonstrates it's a technical quicksand.
The last time there was a weekly Death cross was Dec. 30, 2019, and the price resumed to drop from 0.19311 to 0.10570 by Mar. 9, 2020, shedding 45% of value, but only after retesting the 200 and 50 WMA, bouncing as high as 0.34553, surging 79% till Feb. 10. The moving averages maintained resistance, pushing the price from those highs as much as 69.4% by the Mar. 9 bottom of 0.10570.
h2 Trading Strategies - Short Position Setup/h2Conservative traders should wait for the price to close below the Nov. 9 low, then trigger a return move to retest the neckline.
Moderate traders would be content with an intraday low below the 0.32032 low and a throwback for a closer entry.
Aggressive traders could short now according to their strategy. Here is a generic example:
h2 Trade Sample - Aggressive Short/h2Disclosure: The author does not own any of the securities mentioned in this article.
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