“Half-a-dollar?”
The price of XRP has come to a halt at the $0.59 range after falling from $0.62 on January 11 due to concerns about Ripple’s connection with the US government.
The XRP community has been negatively affected by a recent job posting on the Ripple website. The posting revealed that the company is a federal contractor or subcontractor for the US government.
Being a federal contractor means that Ripple has a contractual agreement with a department or agency of the US government. While Ripple has worked with governments in the past, including partnerships with multiple countries for central bank digital currencies (CBDCs) and settlements, its ongoing lawsuit with the Securities and Exchange Commission (SEC) has strained its relationship with US regulators. As a result, the statement confirming Ripple’s affiliation with the US government has sparked negative sentiment within the XRP community.
The negative sentiment surrounding Ripple’s affiliation with the US government has had an impact on XRP’s social sentiment. On-chain data trends have revealed that the overall sentiment within the XRP ecosystem has turned negative. Santiment’s weighted sentiment metric, which measures the number of negative comments compared to the total comments, reached a two-year low of 1.58% on January 14.
A negative weighted sentiment suggests that most discussions about XRP during that period were predominantly negative. This negative sentiment could be attributed to investors expressing their concerns about Ripple’s connection with the US government. If this negative sentiment continues to grow, it could lead to a significant bearish trend for XRP’s price.
In addition to the negative sentiment, XRP traders have closed futures contracts worth $242 million. This decline in open interest relative to spot prices indicates increasing bearish pressure. XRP’s open interest has dropped by 32% from $755 million to $513 million between January 3 and January 16. On the other hand, XRP spot prices have only decreased by 8% from $0.62 to a low of $0.58.
A decline in open interest is considered a significant bearish signal as it reflects a lack of interest among market participants and a withdrawal of capital from the markets. The shrinking XRP derivatives markets suggest that the current spot price of XRP may be overvalued.
Considering these factors, the decline in open interest and the dominant negative sentiment within the XRP ecosystem, it is likely that XRP’s price will retreat towards the $0.50 area in the short term. The Parabolic SAR technical indicator also supports this forecast, indicating a strong bearish momentum with its dots pointing towards $0.62.
However, for this prediction to be validated, the bulls must overcome the initial psychological support level around $0.55. If they fail to do so, the XRP price could slide towards $0.50. Conversely, if the bulls manage to push the price above $0.60, they could invalidate this bearish prediction.
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