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Ripple (XRP) Bears Running Scared As Number Of Shorts Drops Double Digits

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https://cryptodaily.co.uk/2018/12/ripple-bears-running-scared-as-number-of-shorts-drops-double-digits

Interesting article

"Ripple (XRP) shorts started to tumble soon as they reached the previous all time high. In fact, the 4H chart for XRPUSDShorts shows that the bears are so scared that the number of shorts had to drop double digits despite Bitcoin (BTC) and Ripple (XRP) both being trading in the red today. The situation that we see now is that Ripple (XRP) bears not only have to worry about a rising Bitcoin (BTC) but they also have to worry about an independent Ripple (XRP) that could perform a miracle during a market meltdown. So, shorting Ripple (XRP) is beginning to become less and less attractive for the bears. While shorts on coins like Ethereum Classic (ETC) are up significantly for today, Ripple (XRP) shorts are totally getting crushed even as the fate of 

Bitcoin (BTC) shorts remain uncertain.

The past few weeks have convinced the bears that shorting Ripple (XRP) is not as easy as it used to be. There was once a time when the bears could pull the price down even during most awaited yearly events for Ripple (XRP). During last year’s Ripple Swell Conference, the price of XRP kept on declining before, during and after Swell. Whenever Bitcoin (BTC) would drop, Ripple (XRP) would drop a lot more aggressively. So, the bears began to short it aggressively on exchanges like Bitmex and Bitfinex and it used to work until recently. However, ever since Ripple (XRP) overtook Ethereum (ETH) as the second largest coin by market cap, this situation has changed completely. Not only is shorting Ripple (XRP) less profitable now, it has become a lot riskier from a risk/reward standpoint."

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7 hours ago, JA8 said:

We want shorts to be high, not low. We need the kind of buying conviction that only really happens when shorts are squeezed like mad. 

I know you are knowledgeable about crypto markets, and I am surprised at your response.  I would have thought shorts drying up on XRP whilst they are still expanding on ETH and BTC was a first sign of further decoupling?  An opportunity for XRP to break the downward vortex that everything else is being sucked into.  I would guess that if XRP bucked the trend there would be a flight of money out of BTC and ETH into safe haven XRP?  Is my analysis flawed?

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27 minutes ago, Julian_Williams said:

 

I know you are knowledgeable about crypto markets, and I am surprised at your response.  I would have thought shorts drying up on XRP whilst they are still expanding on ETH and BTC was a first sign of further decoupling?  An opportunity for XRP to break the downward vortex that everything else is being sucked into.  I would guess that if XRP bucked the trend there would be a flight of money out of BTC and ETH into safe haven XRP?  Is my analysis flawed?

Yeah I agree. Would like to hear from @JA8 on your questions too. 

Edited by Palerider

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The more shorts the bigger the eventual short squeeze when prices find a bottom and bounce a few %, as people have to cover in panic or face potentially higher losses. You have to buy XRP from the open market to cover shorts, this buying pressure causes price to rise even more thus creating a positive feedback loop when shorts are really high - this happens in all markets, the best example this year was the VIX explosion in February after having record shorts.

 

The fact that shorts on XRP dropped means that people bought XRP to cover - but the price didn't really jump, which is actually bearish and IF shorts go back up to resume their correlation with increasing BTC/ETH shorts the XRP price dip will be more severe.

 

This is the problem with all these dodgy crypto news sites, almost anyone can post on them and 99% of the people have no idea what they are talking about.

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7 minutes ago, Agrilax said:

The more shorts the bigger the eventual short squeeze when prices find a bottom and bounce a few %, as people have to cover in panic or face potentially higher losses. You have to buy XRP from the open market to cover shorts, this buying pressure causes price to rise even more thus creating a positive feedback loop when shorts are really high - this happens in all markets, the best example this year was the VIX explosion in February after having record shorts.

 

The fact that shorts on XRP dropped means that people bought XRP to cover - but the price didn't really jump, which is actually bearish and IF shorts go back up to resume their correlation with increasing BTC/ETH shorts the XRP price dip will be more severe.

 

This is the problem with all these dodgy crypto news sites, almost anyone can post on them and 99% of the people have no idea what they are talking about.

Thanks, very counter intuitive.  I don't fully understand but get the drift. 

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I'm fairly ignorant on markets (and nearly everything else...  :)  ) but it seems to me that a giant short squeeze might be a great parabolic run starter, but, if you instead want a steady organic rise because of a steady climb in confidence, then you actually want a shortage of shorts. (Couldn't resist the alliteration)

So maybe it's just my ignorance,  but a lowering of shorts in an uncertain time sounds like a good thing to me.  (Unless you are in public and a policeman is nearby...  :) )

  A sign of actual increasing market confidence in XRP (at least compared to its supposed peers).

 

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3 minutes ago, Tinyaccount said:

I'm fairly ignorant on markets (and nearly everything else...  :)  ) but it seems to me that a giant short squeeze might be a great parabolic run starter, but, if you instead want a steady organic rise because of a steady climb in confidence, then you actually want a shortage of shorts. (Couldn't resist the alliteration)

So maybe it's just my ignorance,  but a lowering of shorts in an uncertain time sounds like a good thing to me.  (Unless you are in public and a policeman is nearby...  :) )

  A sign of actual increasing market confidence in XRP (at least compared to its supposed peers).

 

Yes that is my take.  The shortage of shorts is an indicator of a psychological change of heart.  My interpretation of Agrilax is that the larger number of shorts create a higher bounce.  My intuitive answer to that is that the shorts are accelerating the descent and lower the floor on which the bounce happen  I agree that the harder and faster you hit the ground the higher the bounce, but if you hit the ground a few stories higher then you don't need to as big a bounce to recover your lost ground. 

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6 minutes ago, Tinyaccount said:

I'm fairly ignorant on markets (and nearly everything else...  :)  ) but it seems to me that a giant short squeeze might be a great parabolic run starter, but, if you instead want a steady organic rise because of a steady climb in confidence, then you actually want a shortage of shorts. (Couldn't resist the alliteration)

So maybe it's just my ignorance,  but a lowering of shorts in an uncertain time sounds like a good thing to me.  (Unless you are in public and a policeman is nearby...  :) )

  A sign of actual increasing market confidence in XRP (at least compared to its supposed peers).

 

Nothing much to add to Agrilax’s very good summary above. A big short squeeze can help signal the end of a bearish trend as it creates (at least the illusion of) buying with conviction. This can then cause a sufficient sentiment shift to put some support under the market. 

However, so long as BTC dictates the overall tone of the market - which it still is imo - then the open shorts on BTC may provide enough of a squeeze opportunity and should spread to the other coin markets.

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