Cryptocurrencies – XRP Analysis

*Technical analysis of XRP and my latest thoughts on Crypto*

Welcome back to the blog! In this post I am going to revisit a favourite topic of retail traders and probably my least favourite asset class to talk about, Cryptocurrencies. In the past few weeks and months, Crypto has seen huge volatility with big price moves and shocking revelations and I think it’s time for me to write my point of view in a blog post.

I am going to talk a bit about Cryptocurrencies as an asset class and then dive deplete in to the only Cryptocurrency I hold which is XRP and look at the recent price action and run some technical analysis. This post is by no means an attempt to encourage you to buy cryptocurrency or XRP, I am not about that and I think you will find this blog post very unbiased.

I previously talked about Cryptocurrency in a controversial blog post that saw a lot of people send me feedback and their views on the asset class. You can read it by clicking on the link below.

https://diaryofafinancekid.com/2020/02/21/why-cryptocurrencies-will-not-make-you-a-millionaire/

Despite Bitcoin gaining over 300% since the time of writing that blog post (a great trade for anyone) I still stand by a few of the points I made. Firstly, Cryptocurrency will not make you a millionaire. According to the research I quoted in that post, at the end of 2018 the average cryptocurrency investor held $10,000 worth of the assets. That was around the time of the all-time highs of $19,000 for bitcoin and $3 per coin for XRP. Assuming that is then 0.5 bitcoins and the price of Bitcoin then dropped to $10,000 per coin, even with the 300% returns on investment, the average cryptocurrency investor would have gained $15,000.

That is a far cry from becoming a crypto millionaire. In fact, if you bought bitcoin at the lowest price possible since the previous all time highs of 2017, which was around $3200 per bitcoin then you would have still needed to invest $87,000 into bitcoin to become a millionaire. That is around 8.7x larger than the average investor held in late 2018. The calculations are below.

  • Low price circa. $3,200 per bitcoin
  • High price circa. $40,000 per bitcoin
  • ROI 1150%
  • $87,000 x 1150% = $1,000,500

Buying XRP or any of the other cryptocurrencies would have produced worse or even better results but I highly doubt that many readers of this blog have the ability or confidence to invest a near 6 figure sum into an Alt coin or highly volatile asset class like Cryptocurrencies.

However… this blog post is not to say that buying bitcoin at any point in time was a “bad” investment because as at today, everyone who bought Bitcoin prior to the 2018 crash has made significant profits. Even those who bought at the very highs of the 2017 bull market when bitcoin was trading at nearly $20,000 per coin would at some point in the last 12 months returned 100% on their investment.

This fact also proves that time is the greatest tool for all investors. The chart below explains this in more detail.

The basis of the chart above is that the longer you remain invested in the stock market, the lower your probability of returning a loss is. Or in other words, the longer you stay invested, the greater your chances are of generating positive returns which links to another famous quote…

“Time in the markets beats timing the markets”

Now let’s look at something that might intrigue more of you who are interested in crypto and do think it has the potential to produce positive returns in the future. Let’s look at my latest technical analysis of the XRP/USD price chart.

XRP technical analysis.

XRPUSD weekly timeframe price chart.

The weekly price chart is some what necessary in order to accurately and efficiently see all of the price action over the last few years, it really is a crazy picture. As you can, the all time high price of $3.30 per coin was achieved in late 2017 and from there its been a series of sell offs, price spikes, consolidation and more. A real wild ride for investors.

More recently there was the SEC announcement that they would be investigating the potential that XRP is not a cryptocurrency but instead a security and therefore potential for the Ripple company to be in breach of many securities laws. This sent price plummeting from $0.78 down to around $0.18 per coin.

In the last week, XRP has seen even more increased volatility which can be seen on the 1hr timeframe chart below.

XRPUSD 1 hour timeframe price chart.

Price had been range bound for about 5 weeks trading in a zone from $0.18 up to $0.35 before it broke out to the upside with strong momentum last week. The value of XRP gained over 200% in less than 10 days reaching highs of $0.75 before crashing back down to its current levels.

As a pure speculation trade and a chance of perhaps getting involved in the next round of obscene crypto volatility, I would be inclined to say the the current price of around $0.35/$0.38 is a reasonable place to buy in to XRP.

Looking at the chart above and using basic support and resistance analysis, it could be said that XRP is now retesting the highs of its previous range at $0.35 and is looking like it is holding strong. Buying here could see price climb back up to the previous highs of $0.75 or more.

For the “HODL’ers” amongst us (long term believers in cryptocurrency), who have much grander expectations of $3.3, $5 and more, this could see the potential for some serious returns on investment like we have seen more recently in Bitcoin.

Here is a table containing previous price resistance zones on XRP and the approximate return from current market price.

Price TargetReturn from current price ($0.35)
$0.75114.28%
$0.78 (Pre-SEC announcement)122.85%
$0.79 (September 2018 spike)125.71%
$0.926 (April 2018 recovery)164.57%
$3.30 (Bitfinex all time high)842.85%

Please remember to take these figures with a pinch of salt and a sense of humour because as we have seen in just the last 7 days of trading, XRP can just as easily half in value as it can double in value!

XRP volatility analysis vs stocks.

One of the biggest attractions of Cryptocurrency to retail traders and even funds and institutions now is the levels of volatility. Volatility creates opportunity and even the most risk adverse funds are looking to allocate a small percentage of capital to cryptocurrency in the hopes of capturing just a small portion of the upside potential.

The chart below shows the good side of XRP as an investment. That is the 5 year normalised returns of XRPUSD vs the S&P500 index. As you can see, it’s quite a significant difference.

XRPUSD vs S&P500 normalised returns for the past 5 years.

However, when analysing any long term investment you need to at volatility as well. The tables below show firstly, the annual returns of both XRP and the S&P500 but also the annual volatility of each investment.

Annual volatility is represented by the annual standard deviation of each investment.

From the data above, my NON-FINANCIAL advice would be… if you have the guts to withstand almost 7 times more volatility than simply investing in stocks, then you could stand to potentially make more than 538 times more returns.

And only you can answer that dilemma.

End note.

THIS IS NOT INVESTMENT ADVICE! I personally don’t think crypto is a viable investment for any large amount of money but it is hard to ignore the volatility and potential for returns. Therefore, perhaps using basic technical analysis as shown in this chart and buying low/selling high (the cliche quote) then there is a possibility to boost your overall portfolio returns with a small exposure to crypto.

If you are interested in learning my personal trading strategies, please consider my Mastering The Markets – Retail Trading Course. Head over to my Financial Analysis Education page to check out all of my education packages and the deals available.

Useful Links:

All my technical analysis is done using the TradingView platform. You can get access via the link below.

https://tradingview.go2cloud.org/SH3bP

My preferred broker of choice is IC Markets. Low spreads and trading costs really help long term profitability. A link to their site is below.

https://www.icmarkets.com/?camp=38537

FTMO Trader Funding Programme.

https://ftmo.com/?affiliates=335

Thanks for reading and please don’t forget to LIKE, SHARE and FOLLOW my blog to stay up to date with the latest market analysis and trading education posts.

DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.

%d bloggers like this:
search previous next tag category expand menu location phone mail time cart zoom edit close