Significant Challenges Facing XRP Price
When discussing cryptocurrency, most are simply concerned with who will be the next major riser in the market. Ethereum, Bitcoin, and Litecoin are among the few major players, but which token will join them? Many feel that it will be Ripple’s native token, XRP.
Though the current XRP price doesn’t scream that it will be a monster anytime soon, cryptocurrency is a technology that we haven’t seen the full potential of yet. Platforms like Ripple are attempting to change the game, but there are a plethora of challenges that still remain in the way of XRP.
The Macro Picture
There are a plethora of short-term risks that investors will need to be keen on. That said, broader economic factors are always a major variable to contend with. For instance, any kind of economic slowdown or even a renewed squeezing of credit could create a panic for investors, steering them away from more volatile assets like cryptocurrencies.
If that happens, major names like Ethereum and Bitcoin will suffer but not all that much. Tokens like XRP would suffer far more. But if macro conditions hold, then XRP still has major growth potential once there is more clarity surrounding its exchange-traded funds (ETF) position. Gains could be increased in a more favourable market by the same leverage that magnifies losses.
Liquidity and Leverage May Be the Key
It wasn’t all that long ago when XRP crashed. When that happened, about $19 billion in leveraged crypto positions was gone. That kind of impact is felt deeply across the entire crypto marketplace, not just by holders of XRP.
There is always the potential for a major liquidity event, one that could lead to forced sales and margin calls. XRP is hovering right above key technical levels, but a steep enough drop could trigger further selling. With more investors bailing and selling their XRP holdings, it could drag XRP down even further, providing an excellent opportunity for those with leverage.
Rising Risks and Delayed Catalysts Test
October was supposed to be the big month for XRP. The U.S. government shutdown has frozen decision-making, however, which leaves XRP stuck waiting to see if it will get approvals for its own ETF. That move alone could inject serious momentum into the XRP market.
The delay has also cooled sentiment for XRP when it looked like investors might be optimistic. If anything, it just goes to show how quickly the tide can turn within the cryptocurrency market.
Moreover, there is an inherent danger that comes from those ETFs not coming to fruition. It would be a major blow to Ripple and its goal of bridging the world of crypto with the more traditional financial world.
Even worse, the risks go beyond an SEC approval. An escalation of trade issues between China and the U.S. continues to linger, which could scare investors away from riskier assets like XRP. The crypto market is vulnerable to events like these, especially more speculative tokens like XRP.
Caution is Critical
Whether investing in XRP or another form of cryptocurrency, it is always vital to practise caution. There is some confusion between cautiousness and cowardice within investing circles, but it is vital when investing in crypto. After all, XRP has always lived right in the middle of the intersection of reward and risk.
It is also worth noting that crashes are all too common in the world of crypto. Even Bitcoin, the unquestioned king of the market, has had astronomical drops. Proceeding with caution and not getting in above your head is the most prudent move to make.
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