In summary
- XRP hit three-year highs following the US presidential election, buoyed by market optimism.
- Open interest in XRP futures reached nearly $2 billion, reflecting a surge in trader speculation.
- Ripple faced a $125 million fine following the July 2023 court ruling, although XRP was declared not a security for retail investors.
XRP, overseen by digital asset infrastructure and payments firm Ripple Labs, is trading at heights not seen in three years, as the broader Cryptocurrency market benefits from anticipated political winds in the US.
While the asset has lost 16% of its value from a Saturday peak of $1.20, it is still down more than 80% on the week at $1.06, according to data from CoinGecko.
The currency has been on a clear upward trajectory since President-elect Donald Trump secured victory in the US presidential election earlier this month.
That has fueled investor interest in multiple cryptocurrencies, including meme coins, which continue to lead the market rally in terms of total returns along with relative gains for large-cap coins. Nothing is more evident than in the futures market for the world’s sixth-largest cryptocurrency, with open interest rising to record levels just under $2 billion, according to data from CoinGlass.
CoinDesk was the first to report the news.
Open Interest represents the total number of active futures or options contracts that remain open and have not yet been settled or closed.
High Open Interest often reflects an increase in speculative trading as traders place bets on future price movements. This can lead to greater volatility, as leveraged positions amplify reactions to news or market events.
“The recent rise in XRP futures open interest to record levels signifies an increase in trader interest, often an indicator of optimism in the market,” said Nick Forster, founder of onchain options DeFi protocol Derive. to Decrypt.
Coupled with consistently high and positive funding rates, it suggests that new market participants could be capitalizing on the “grassroots trading opportunities in XRP,” the founder added.
Basis trading refers to a strategy that seeks to profit from the difference between the spot price of an asset and its price in the futures or derivatives market.
“The activity highlights the growing appeal of XRP and its dynamic position within the trading community, suggesting speculative optimism as traders position themselves to take advantage of anticipated price movements,” Forster said.
This comes amid speculation that this month Securities and Exchange Commission Chairman Gary Gensler could resign shortly after Trump’s inauguration on January 20.
According to many within the industry, Gensler has persisted in what they have called a “crusade” against cryptocurrency companies, including Ripple.
Launched in December 2020, the SEC’s lawsuit against Ripple Labs alleged that the company and its founders sold XRP to investors considered securities. In July 2023, a federal judge ruled that XRP is not a security when sold to retail investors, but institutional sales violated securities laws, leading to a $125 million fine for Ripple.
The SEC has appealed this decision, and the court has set a deadline of January 2025 for the SEC’s final reports.
With its possible exit, Ripple, and by extension, XRP, could have a clearer path to regain market trust and expand its use case without regulatory uncertainty, depending on the outcome of the case.
With the upcoming change in US political leadership, XRP traders are hopeful that the SEC may soften its stance in court regarding the classification of XRP as a security.
Trump has declared his intention to “fire Gary Gensler on the first day (of his term).” While Trump cannot directly fire Gensler, Decrypt analysts he previously spoke to speculate that Gensler could voluntarily resign in the next six months.
That could also strengthen the prospects of a US exchange-traded fund (ETF) for the asset, according to analysts who previously spoke to Decrypt.
As evidenced by the recent price surge, XRP investors are betting on those developments, Pratik Kala, portfolio manager and head of research at digital asset fund manager Apollo Crypto, told Decrypt.
“XRP is rising due to rumors that Ripple CEO Brad Garlinghouse will advise Trump on cryptocurrency policy,” Kala stated.
This has boosted trader sentiment, and with Bitwise having previously filed for an XRP ETF, some are plugging these developments in hopes of capturing potential upside, he added.
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