XRP, the digital token used by the Ripple network, lost more than half of its value in a matter of hours, falling sharply today after experiencing significant gains over the weekend.
The digital asset plummeted to as little as .37 this afternoon, according to CoinDesk data.
At this point, the token had declined roughly 51% from the intra-day high of .76 it reached close to 6 a.m. EST, additional CoinDesk figures reveal.
XRP suffered this pullback after rising more than 100% over the weekend, climbing from an opening price of .29 on Saturday to an intra-day high of .60 on Sunday.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
When explaining these recent developments, analysts pointed to paper-thin liquidity, as well as how this situation made it easier for traders to manipulate the markets.
“Given XRP’s delisting from the majority of USD banked exchanges, liquidity on XRP has become incredibly thin,” said Jesse Proudman, CEO of crypto hedge fund Strix Leviathan.
“This lack of liquidity creates opportunities for global communities to coordinate pump and dumps which is exactly what the price action appears to indicate is happening.”
Denis Vinokourov, head of research for London-based digital asset firm Bequant, offered similar input, stating that:
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“The price run was in part due to thinned liquidity conditions of the token, which is a direct result of mass delisting.”
Edul Patel, cofounder and COO of crypto startup Mudrex, also chimed in.
“Looks like XRP fell to a coordinated pump and dump attack,” he stated.
SEC Suit Looms Over XRP Market
Market experts also emphasized the recent charges brought by the U.S. Securities and Exchange Commission, as well as their impact on the digital token’s price.
The SEC filed these charges against Ripple Labs Inc., along with CEO Bradley Garlinghouse and cofounder Christian Larsen.
Alex Mashinsky, cofounder, chairman and CEO of Celsius Network, helped explain how this situation affected the digital token’s market movements.
“XRP had substantial pressure on its price from short-sellers and community members selling in light of the SEC news,” he noted.
“At the same time since the lawsuit was filed, Ripple announced that they would suspend any additional sales of XRP until the suit is resolved which relieved some of the pressure. Ripple used to sell as much as 1B XRP each month.”
“The big shift came Friday when Ripple filed its answers to the SEC complaint and provided very strong arguments against the SEC claims,” said Mashinsky.
“The community saw this as very positive news and many XRP loyalists bought on the news, this caused short sellers to cover their short positions and created a short squeeze similar to GameStop, volume on many exchanges went up over 10x normal volumes and was similar to the November 2020 pump we have seen.”
However, he emphasized that the situation has changed recently.
“As the pressure on buyback and liquidations of short sellers has abated, prices came back to normal pre-SEC levels. The Reddit crowd is moving their money from one asset to the next to trigger such aggressive price movements but you need to remember that on Wall Street such moves are followed by large institutions like BlackRock piling into GME behind the Reddit crowd.”
Mashinsky noted that going forward, XRP faces an uncertain legal future.
“We don’t know the outcome of the SEC battle but you can expect many such swings to happen in the next few months as each side opens more and more fronts to try and win its case,” he stated.
“This case may go all the way to the Supreme Court as there is a clear need to update the Howey Test circa 1933 laws.”
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether and EOS.