XRP’s price witnessed a significant downturn today, attributed to a combination of delays in the Ripple vs. SEC lawsuit and waning expectations for a September interest rate cut. Over the past two weeks, XRP had managed to secure substantial gains, but these have now been wiped out. The crypto community is left speculating over the causes behind this dip.
Ripple vs. SEC: An Unending Saga
The long-standing legal tussle between Ripple Labs and the United States Securities and Exchange Commission (SEC) took another twist recently. A highly anticipated closed-door meeting scheduled for August 1st between SEC officials was abruptly canceled. This meeting had drawn considerable attention, with many speculating that a resolution might be on the horizon. However, the unexpected cancellation has left both Ripple and the SEC tight-lipped, providing no specific reasons for the delay. This lack of clarity has contributed to a 10.75% decline in XRP’s price since August 1, including a significant 6.75% drop today.
Interest Rate Cut Expectations Dwindle
Another factor weighing heavily on XRP and the broader crypto market is the diminishing likelihood of an interest rate cut in September. Data from the CME as of August 2 shows that the probability of a 25 basis point rate cut has fallen to 71.50%, down from 88.2% just a week prior. This shift in expectations followed Federal Reserve Chair Jerome Powell’s press conference on July 31, where he emphasized that any dovish decision would hinge on inflation cooling down. Powell stated, “The question will be whether the totality of the data, the evolving outlook, and the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market. If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September.” Since Powell’s remarks, XRP’s price has dropped by 15.35%, indicating that traders are securing profits amid the uncertainty.
Ripple’s 1 Billion XRP Unlock
Adding to the downward pressure on XRP is the scheduled release of over a billion XRP from Ripple’s escrow. Whale Alert captured a series of large transfers in and out of Ripple’s escrow wallet, with 500 million XRP moved out in two tranches as of August 2. This influx of supply onto the market can lead to downward pressure on prices if demand doesn’t rise to match it. However, Ripple has a history of re-locking a significant portion of the released XRP, as evidenced by its actions following the June 1 unlock when it re-locked 800 million XRP and sold around 300 million XRP, valued at $182 million.
Technical Analysis: Bearish Divergence
From a technical perspective, XRP’s recent losses are part of a broader correction that was preceded by a bearish divergence signal on the daily chart. A bearish divergence occurs when the price forms higher highs, but the relative strength index (RSI) forms lower highs, indicating a lack of upside momentum. This typically leads to corrections, and XRP has entered a similar cycle after peaking at a local high of around $0.658 on July 31, coinciding with the RSI’s lower high formation at 65.48. The increase in daily volumes during this correction suggests strong trader conviction in the downtrend.
As of August 2, XRP was testing its 0.5 Fibonacci retracement level at around $0.571 as support, eyeing a potential rebound towards the next Fib line at approximately $0.607. Conversely, a break below the $0.571 support could see a test of the 50-day and 200-day exponential moving averages (EMAs) as support, both of which are around the $0.54 level, aligning with the 0.382 Fib line.
Conclusion
Today’s decline in XRP’s price can be attributed to a confluence of factors, including the delay in the Ripple vs. SEC lawsuit, dwindling expectations for an interest rate cut in September, and the scheduled release of XRP from Ripple’s escrow. These elements have combined to create a challenging environment for XRP, leading to its recent price dip. As always, investors should conduct their own research and exercise caution in their trading decisions.
