XRP Liquidations Soar as SEC Lawsuit, Token Airdrop Whipsaw Markets

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Liquidations for XRP futures contracts rose sharply towards the end of the year, when bullish signals in November followed by decidedly bearish news in December, the price of the token fell.

According to data from analysis provider Bybt, XRP futures contracts worth over USD 1.5 billion have been liquidated since the beginning of November. Liquidated futures contracts worth nearly $ 700 million were posted between March and October.

In November, the price of XRP soared over 220% to a two-year high of just under $ 0.80 as traders anticipated a scheduled Flare Network token airdrop event for all XRP holders. In short, everyone who holds XRP will automatically receive a portion of the new Spark token, which encourages new buyers to accumulate XRP.

The leading U.S. cryptocurrency exchange Coinbase announced its plans to support the upcoming air drop. This is evident from CoinDesk’s previous reporting.

“XRP saw massive upward movements in November due to consumer interest in the Spark Airdrop scheduled for December 12, 2020,” said Florent Moulin, cryptocurrency researcher at data provider Messari. “In the market, veteran investors have also amassed XRP in anticipation of a retail-led bull market.”

The acute XRP bull trend quickly ended when the US Securities and Exchange Commission filed a lawsuit against Ripple for allegedly violating the federal securities act in selling the cryptocurrency to retail customers, which raised $ 1.3 billion over a seven-year period.

Traders reacted negatively to the news when XRP immediately began returning large chunks of its profits from the previous month. Institutional investors followed with cryptocurrency money manager Bitwise liquidating the entire XRP position of its index and prominent brokers like OSL informing clients that they have stopped all XRP trading.

Both events – the air drop and the lawsuit – have brought volatility in XRP prices to its highest level since July 2018, according to Coin Metrics data, with volatility rising more than 130% since early November.

A sharp downward move in the price of XRP is likely due to a combination of factors, Moulin said, CulinDesk said. Perhaps most significant, however, is the SEC’s lawsuit against Ripple.

Also noteworthy is the increased sales from Ripple co-founder Jed McCaleb, who sold over $ 120 million in XRP in December, an amount more than three times what it was in previous months.

Part of the price movement in December was also caused by XRP holders selling after receiving tokens from the Airdrop event, Moulin said.

Regardless of the reason, XRP has fallen over 60% since news of the SEC’s lawsuit and fell below pre-drop levels in early November, hitting $ 0.21 on Wednesday.

And with prices still dropping and futures contracts valued at over $ 350 million worth of liquidating two days before Christmas Eve, XRP investors face a not-so-happy Christmas season.