What Stage of the Cycle is the Market in? And is XRP Really a Crypto Safe Haven?

When observing the psychology of markets, it is important to understand which stage of the cycle an asset is in. It is debatable whether the price of Bitcoin at $6,000-$6,500 was in fact the return to ‘normal’ stage. Many individuals and prominent investors in the space were confident in calling a bottom at $6,000. Therefore, the retracement to $6,000 was considered a ‘normal’ price relative to the typically irrational behavior of Bitcoin and crypto assets. The reality is that we are possibly just beginning the fear stage. This is when all the ‘get rich quick’ retail investors will inevitably puke out of the market while smart money enters silently. It is possible that Bitcoin will enter this phase shortly as bullish sentiment continues to dissipate.

During this stage of the market cycle, previously bullish investors will give up on Bitcoin and call it a scam, a Ponzi, and once again declare it dead. Meanwhile, they overlook the fact that in 2011, Bitcoin fell from $32 to $2, a 95% decrease. Furthermore, our current bear market is nothing relative to 2011 or 2014. Realistically, there is no ‘moon’ for immature investors to look forward to. The ‘moon’ was December 2017 and although there may be another bull run toward the end of 2019 to 2020, no market cycle is identical.

At this time, it is always important to be cognizant of the individuals who lost a large portion of wealth due to these recent declines. Nevertheless, this market is truly unlike any other in the world. The opportunity for short sellers as of late has been incredibly lucrative. A talented trader could short this market all the way down to the ‘depths of despair’ phase and eventually find an opportunistic entry point before the ‘return to mean’ phase. However, that does not necessarily mean prices will go straight down. Subsequently, the current downward momentum and lack of support does not bode well for long positions. Earlier in the week, nearly every alt coin was down upwards of 20%. This is comparable to the opportunities seen in November and December of last year. During that time, even dumb money could be profitable longing crypto, this time around, nearly anyone who shorted over the past few weeks has made significant gains.

Another recently debated topic in the cryptocurrency market is the resilience of XRP. After XRP took the 2nd largest market cap position away from Ethereum, many are considering XRP to be a haven in the midst of a large market sell off. XRP has gained popularity as of late due to Ripple’s launch of xRapid. The primary reason XRP fans are getting excited is because the daily ledger transaction volume of XRP is now larger than its total trading volume. This supposably means that banks are using XRP for international transfers more than traders are trading XRP on exchanges. This is definitely a positive indication for the company Ripple, but some are still skeptical of xRapid’s effect on the price of XRP.

Overall, Ripple and XRP speculators are desperately hoping to become price independent of Bitcoin and the collective cryptocurrency market. Unfortunately for them, a large portion of XRP investors are the same individuals who speculate on other cryptocurrencies. In addition, the majority of exchanges only list Bitcoin, Litecoin, Tether and Ethereum as base pairs. In the long term, XRP’s correlation to Bitcoin and the rest of the market will most likely decrease with the addition of more base pairings and the increased dependability and liquidity of stable coins.

In the short term, the market is still relatively immature and a long position in XRP is too risky because the asset has not proven that it has the strength to act independently from Bitcoin. Although XRP has out preformed Bitcoin during the recent price drop, its dollar value decreased from $0.50 to $0.43 yesterday. In other words, if Bitcoin continues to decrease and falls to a target of $2,500, it seems unlikely that XRP would be able to increase in dollar value under those kinds of market conditions.

Disclaimer: I am not a financial advisor. This is not financial advice. Please do your research independently and make objective decisions. This article is intended to educate readers on the recent state of the cryptocurrency market. The author of the article trades cryptocurrency.

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