XRP’s double-digit gains could be the result of a bold bet by retail investors, particularly in Asia, that the price of the cryptocurrency could follow the broader Crypto Bull Run. The recent rally surprised many as it hit the news not long after XRP crashed. The US Securities and Exchange Commission filed a lawsuit against Ripple Inc. claiming the company sold the token as collateral.
However, it appears that some market participants will not be deterred by the regulator’s actions.
“Traders often trade products on a relative value basis,” said Chris Thomas, Head of Digital Assets at Swissquote Bank, to CoinDesk on January 7th. “XRP felt cheap a few days ago. Today I think it feels normal again. “
Read More: XRP Climbs Secure Crypto Rankings Up Nearly 50% Up
Simons Chen, a Hong Kong-based crypto trader, told CoinDesk that he bought XRP when the price hit rock bottom in late December with the belief that it would soon bounce back, following the bitcoin trend.
Chen said that as Bitcoin and other alternative cryptocurrencies (altcoins) rose, XRP price went in the opposite direction due to SEC news. This move represented a great opportunity for him to “buy the dip”.
Read more: An SEC victory in the Ripple case would make XRP “unwieldy”, say market professionals
According to Nomics, the trading volume of the most important exchanges worldwide, especially in Asia, also shows significant traffic in the pairings XRP / USDT (Tether) and XRP / KRW (Korean Won).
CoinDesk Research has been collecting XRP trading volume data from six exchanges that have seen noticeable activity since December 1, 2020, and has broken down the data by price currency. Significant volumes came from the XRP / USDT and XRP / KRW pairings, but the volumes of the XRP / Bitcoin and XRP / Ether pairings were relatively small.
Tether, a dollar-pegged stablecoin, is widely used by traders and investors in Asia, especially China, to purchase cryptocurrencies. Due to the regulations in South Korea, people there often buy cryptocurrencies directly from Fiat on Korean exchanges. The data shows that markets in Asia were the main driver of the price rally.
(Nomics, CoinDesk Research)
Although several exchanges, especially those present in the US, have announced the suspension or deletion of XRP on their platforms, XRP pairings are still available on many other exchanges, including the so-called “Big Three” – Binance, Huobi, and OKEx – it all started in China.
“Unlike Coinbase or other ‘regulated’ exchanges, Korean and [other] Asian exchanges don’t have to care as much about what the SEC is doing, and investors in Asia are less sensitive to the news, ”said Sinhae Lee, partner at Shanghai-based blockchain consultancy Block72. “With the current price increase in Altcoins, investors bought XRP because the price had fallen sharply.”
The lack of institutional investors, particularly in the US, is evidence that retail investors outside of the US are most likely the cause of the rebound in XRP, according to Lingxiao Yang, chief operating officer of the Crypto Quant Firm Trade Terminal. Yang said major digital asset managers, including grayscale, had removed XRP from their funds, “a death penalty” for the XRP market in the US [Grayscale is owned by DCG, CoinDesk’s parent company.]
Read More: Grayscale Drop XRP From Large Cap Crypto Fund After Ripple SEC Suit
If the increasing appetite of retail investors is the only driver of XRP price, it’s hard to say whether the price will stay healthy over the long term. A key factor will be what happens between Ripple and the SEC. As recently as Wednesday, the company’s CEO, Brad Garlinghouse, said his company had “tried” to settle the costs of completing unregistered securities transactions with the SEC.
Read More: Ripple “Tries” To Resign With SEC Before XRP Suit, Says CEO
“When the SEC refused [Ripple’s] suggestion [to settle] and there seems to be nothing more than a lawsuit then the sign is now overrated in my opinion. “Thomas from Swissquote said. “As an 18 month lawsuit, it will weigh heavily on the asset.”
At press time, XRP was trading at $ 0.31, down 8.95% over the past 24 hours but up 14.2% from its December low of around $ 0.17.