One of the biggest attractions of the cryptocurrency market is its volatility and you don't need an investigation under the auspices of New York's Attorney General to tell you that the market is in the throes of rife manipulation.
While most exchanges failed to comply with the voluntary information request from the New York Office of the Attorney General (OAG), there was one stark revelation. Coinbase, which is officially licensed to operate as a virtual currency exchange, admitted that it accounts for 20% of trading volume on its own exchange.
While revelations like these may dissuade institutional interest, the manipulation-driven volatility is attractive to retail traders. Indeed, the overarching sentiment among these exchange operators is that the shenanigans doesn't bother traders too much, “Traders don't really care about manipulation,” noted one exchange operator.
Looking at Ripple's behavior this week, it's easy to see why.
What Happened With Ripple?
Ripple opened trading on September 18 at $0.26, trebled in value against the dollar within three days to trade at $0.80 in some exchanges on September 21, and at the time of this writing is trading around $0.45.
Such market behavior can be extremely enticing for retail traders but why did this happen? Is it just manipulation by exchanges or is there more to it than that.
Reasons For Ripple's Flash Rise And Fall
There's no denying that manipulation is a huge factor. Cryptocurrency markets are unregistered, unregulated, largely unlicensed. It's Rafferty's rules, a very immature scene where we're yet to figure out how to weed out bad players without legal intervention eventually steps in to stomp it out for us.
But there are other factors in play here so what are these factors?
Apart from Bitcoin, the most widely adopted digital currency, no cryptocurrency has established indispensable utility. Most altcoins are either derivatives or misguided deviations from the fundamentals of Bitcoin. Common factors for altcoin rallies are news, rumors, announcements of technical updates or partnerships.
Ripple announced a partnership last week with the National Commercial Bank of Saudi Arabia, the first bank of Saudi Arabia and the largest in the Middle East. Perhaps the Saudis are hoarding some XRP?
Ripple's xRapid, a cross-border commercial payment solution for financial institutions, is expected to go live next month. There are misgivings aplenty regarding regulatory impediments to xRapid but the cryptocurrency market has been conditioned to ‘buy the rumor', whether or not it may eventually come to pass.
Yet another rumor doing the rounds is that with Binance seeking to establish fiat gateways for its exchange, we may soon see XRP pairs on Binance. Binance and Ripple have been collaborating behind the scenes, lobbying together across Europe, since July.
With so much manipulation, does TA even matter? Yes, it does! Well, after a fashion. You know the old saying, “perception is reality”? When traders across the board accept TA as valid, it then becomes a self-fulfilling prophecy.
Ripple bounced off its very strong historical support level at $0.25(c. 4200 satoshis). There was a bounce off this level in mid-August but it lacked momentum. However, this time, with other factors in play, the bounce was significant.
Let's be honest. The market has been relatively dormant throughout the year. So much so that it has left parched traders to wonder if the Halley's comet might appear sooner than a bull market.
In these grim times, when a major altcoin rallies so rampantly out of nowhere, retail traders tend to FOMO into such rallies in their droves, no questions asked.
Will Ripple Hold On?
No Would Be The Short Answer.
The consensus on Ripple with regards to its designs on being a global commercial remittance platform, based on extensive research and testing, is that Ripple's products have “no interesting properties and its trust networks are unlikely to be regarded as reliable.”
Further, Ripple's protocol, as outlined by Ripple, would centralise the global financial infrastructure around large banks and, unlike Bitcoin, is not a radically different interpretation of the financial system.
Apart from Bitcoin, there are no long-term guarantees in the cryptocurrency market. Ethereum, considered the most reliable altcoin, has more Dapps deployed on its platform than there are users for all the Dapps combined.
At this point, altcoins are simply random assets being traded against Bitcoin. Their rallies are not based on utility but news and rumors. History shows that they may appear and disappear like ships that pass in the night.