CRYPTO CRASH: EXPERTS WEIGH IN AS LEVERAGE DRIVES MARKET BOTH WAYS, INCLUDING XRP

The Ripple price recovery is fading fast. XRP looks in danger of going even lower.

XRP was still recovering from one crash when it was hit with a second, and more violent wave of selling.

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The Ripple price recovery is fading fast. XRP has not only reversed Friday’s rally but looks in danger of going even lower.

XRP was still recovering from one crash when it was hit with a second, and more violent wave of selling.

Ripple’s XRP comes in as a particularly interesting case. The cryptocurrency XRP lost two-thirds of its value, from 1.96 to 0.65, in a moment when most exchanges decided to restrict the trading of the instrument for the time being on account of the SEC v. Ripple lawsuit.

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Ever since the complaint was filed in late 2020, the Securities and Exchange Commission has been confronted by angered XRP holders, who feel their rights are not being protected.  John E. Deaton, the lawyer for the XRP holders who have filed a motion to intervene in the court, has even suggested holders – or investors, depending on the answer to “Is XRP a security?” – are being targeted by the SEC.

So, with crypto exchanges blocking the trading of XRP, volumes should probably get thinner. As it turns out, XRP is the fourth most traded digital asset on Kraken (an exchange that also halted the trading of XRP in the United States) and other venues.

This is the result of margin trading in cryptocurrencies, which is particularly predominant in Asia Pacific jurisdictions. According to a 2021 Cambridge University Crypto Asset Benchmarking Study, APAC exchanges offer considerably greater leverage.

“While this allows for greater gains in speculative trading, it also accelerates losses exponentially”, said Natallia Hunik, Chief Revenue Officer at Advanced Markets.

“The type of volatility that we see in crypto assets is non-customary where traditional financial instruments are concerned so, given the combination of lower liquidity than traditional assets and higher volatility, overleveraged crypto trading has a greater chance to create a cycle, or trend, and to ultimately drive the price of the crypto asset down.”

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