The crypto market has seen some crazy pumps over the past couple of weeks with digital assets like Dogecoin and XRP surging dramatically within short time periods. Initially, there were suggestions that a short squeeze was the cause of these huge movements. However, key market metrics point to different reasons other than short-seller liquidations.
The price of XRP jumped by about 150% within a few hours between Jan. 30 and Feb. 1 to hit $0.76, its highest price for more than two months. Early indicators were that the pump was driven by speculation on the subreddit r/Satoshistreetbets, that is a copy of the r/Wallstreetbets. r/Wallstreetbets was responsible for the recent surge in stocks on the US financial markets creating short squeezes that resulted in huge losses for hedge funds. Hence the speculation that the social media platform and the same looking community was behind the recent surge in XRP price.
Following the surge in XRP price there was the feeling that social media group-based investing and market manipulation was becoming a trend and that the cryptocurrency was just its latest victim.
Data obtained from the market and social media platforms, however, provided evidence showing there was some link between the online activity and XRP price. For instance, TheTie, a social analytics data provider showed that the twitter uses had a significant impact on price as their activity was correlated to the cryptocurrency’s surge.
However, further scrutiny into market data shows that the pump was not coordinated in a manner to cause a short squeeze unlike earlier instances in the US stock market. For instance, Bitfinex’s long-to-short ratio indicates that the combined margin trades on its USD and BTC based markets was $124 million, up from $95 last month.
Of this figure, 180% favoured longs negating the need for a short squeeze. Also, the shorts margin amounted to $25 million, an insignificant figure to the cryptocurrency’s average daily volume of about $1.55 billion.
Looking at the futures markets, there is an open interest in the region of $277 million. This figure has not changed significantly from the last month showing that buyers and sellers are well aligned in the XRP market.
The digital asset has also not experienced a negative funding rate for over a month thus showing the social media group action did not really have significant impact on the XRP price pump.
Image courtesy of pixabay
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