Open Interest in XRP Surges to $800M as Crypto Traders Hope Ripple-SEC Verdict Will Bring 'Alt Season'

If the court rules that XRP is a security, it would mean the same for other alternative cryptocurrencies and subject the broader market to stringent supervision.

AccessTimeIconMar 29, 2023 at 1:33 p.m. UTC
Updated Mar 31, 2023 at 5:20 p.m. UTC
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Investors are looking again at the futures market tied to payments-focused cryptocurrency XRP amid hopes that Ripple Labs, which the U.S. argues issued the token, will win its legal battle against the Securities and Exchange Commission and spur more risk taking in the broader market.

XRP has rallied 57% since March 22, reaching a 10-month high of about 58 cents, according to CoinDesk data.

Since the rally began, the notional open interest, or the dollar value locked in unsettled and active contracts trading on futures and perpetual futures exchanges, has increased by nearly 90% to $843 million, the highest since December 2021, data from Coinglass shows.

An increase in open interest coming alongside an increase in price typically suggests an influx of new money on the bullish side and is said to confirm the uptrend. At press time, funding rates – representing the cost of holding bullish long or bearish short positions – were positive on most exchanges, indicating the dominance of bullish leverage traders. The broader market was up as well, with bitcoin (BTC) rising above $28,000 in a move that reversed the losses seen early this week after the U.S. Commodity Futures Trading Commission sued Binance, the world's largest crypto exchange by trading volume.

"The bullish impulse stems from Ripple's case vs. the SEC, where optimism for Ripple's win seems to be becoming more dominant," Lewis Harland, portfolio manager at Decentral Park Capital, said in a market update.

"Maybe that Ripple win sets off a bullish impulse down the risk curve (alt season)," Harland added. Alt season is a crypto slang that describes a period where alternative cryptocurrencies like XRP, SOL, DOT, gaming tokens, decentralized-finance coins and meme coins outperform bitcoin and ether (ETH).

Ripple and XRP aren't interchangeable. While Ripple is a fintech company focused on building a global payments network, XRP is an independent digital asset used for things like online payments and currency swaps. Ripple argues that it did not issue XRP.

In 2020, the SEC charged the Ripple Network with selling unregistered securities after the platform sold $1.3 billion worth of XRP. Ripple has long maintained that XRP is a commodity, not a security, as alleged by the SEC.

Securities are more tightly regulated than commodities and demand greater transparency and reporting by companies. Hence, Ripple's victory is likely to bring cheer to the broader market, but a loss could rekindle risk aversion.

"A win for the SEC could also impact other altcoins as they will likely be subject to more regulation," Markus Thielen, head of research and strategy at crypto-services provider Matrixport, wrote in a note to clients on Monday. "However, if Ripple is successful in this case, XRP’s legality in the U.S. market will be solidified and help drive a price rally."

UPDATE (March 31, 2023, 17:05 UTC): Clarifies that while the U.S. Securities and Exchange Commission argues Ripple issued XRP, Ripple disputes that assertion.

Edited by Stephen Alpher.


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Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.

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