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Chart data shows $XRP currently displaying a similar liquidity structure to Stellar amid the latter’s recent massive price surge.
Following the DTCC’s announcement that it had selected the Stellar blockchain for its securities tokenization project, Stellar ($XLM) jumped more than 40%, reaching $0.29 before pulling back to around $0.25 at the time of writing.
This surge has brought attention to $XRP due to its price correlation with $XLM. Crypto analyst CryptoInsightUK believes $XRP could be preparing for a similar breakout, arguing that the asset now shows many of the same signs that appeared before $XLM’s recent rally.
Key Points
- $XLM jumped more than 40% after DTCC chose Stellar for its securities tokenization initiative.
- CryptoInsightUK says $XRP is now seeing a similar liquidity structure to $XLM following its surge.
- The $XLM price broke out of its trading range before $XRP during a similar setup in November.
- The analyst argues that large short positions above $XRP could fuel a strong rally through a short squeeze.
- Based on liquidity analysis, CryptoInsightUK believes $XRP could revisit $3.60 and potentially reach $4.20-$4.30.
$XLM Typically Moves Before $XRP
In a recent video analysis, CryptoInsightUK noted that while $XRP and $XLM tend to move alongside each other, $XLM typically makes the first move before $XRP follows.
To prove this, he called attention to the November 2024 rally, noting that $XLM appeared to break out of its trading range before $XRP did. According to him, on Nov. 11, 2024, $XRP had not yet moved decisively above its local range high of about $0.63, even though it was beginning to test key resistance levels.
On the other hand, $XLM managed to break above its range high area roughly one or two days earlier. While $XRP continued to move sideways around Nov. 11 and 12, $XLM had already started showing strength. According to the analyst, $XRP did not begin its more meaningful upward move until around Nov. 16 or 17.
He also pointed out that $XRP did not fully break through a resistance level that had held it back for months until roughly Nov. 28. Although $XLM never reached new all-time highs during that period, he believes the comparison is still useful because $XLM clearly broke out of its local range before $XRP did.
Why the $XRP-$XLM Relationship Matters
According to CryptoInsightUK, the two assets tend to move closely together when their charts are compared. However, he observed that $XLM usually stays slightly ahead of $XRP and often starts moving first.
For that reason, he believes traders should pay attention to $XLM’s latest rally. While he noted that he is not predicting that $XRP will surge within the next day or two, he thinks $XLM’s move could be an early signal that $XRP is getting ready for a breakout of its own.
The analyst said he is encouraged by $XLM’s continued strength because positive momentum in one major blockchain project can often lift interest across the wider market.
Liquidity Levels Suggest More Room to Run
CryptoInsightUK then analyzed $XRP’s and $XLM’s liquidity data. He explained that $XRP has spent a long time moving within a narrow range while large amounts of liquidity have built up above the current price.
He acknowledged that some liquidity still exists below the market and that $XRP could potentially fall toward $1.22. However, he believes the larger opportunity lies above current levels. He highlighted liquidity clusters around $1.70 and $1.80, saying that if $XRP reaches those areas, the move could become much stronger.
The analyst then compared $XRP’s liquidity chart with $XLM’s. Before its recent rally, $XLM also had a large amount of liquidity sitting above the price. Although both assets had liquidity below them, he said the overall structure looked very similar.
One difference was that $XLM did not have major liquidity levels until around $0.40, while $XRP has liquidity spread across much higher price zones. Considering past market behavior, he believes assets often accelerate once they move into these heavily populated liquidity areas.
A Short Squeeze Could Add Fuel to the $XRP Rally
CryptoInsightUK also argued that much of the liquidity above $XRP comes from traders holding short positions. If price moves higher, those traders may be forced to close their positions, which requires buying $XRP and can push the market even higher.
Although he noted a liquidity gap between $1.90 and $2.40, he stressed that $XRP still has much more liquidity above it than $XLM did before its breakout. If a strong catalyst appears, he believes $XRP could move through these levels quickly.
Essentially, he suggested $XRP could eventually return to at least $3.60. Speaking further, he also said that if a certain reading on his chart is not caused by an API error, $XRP could potentially reach between $4.20 and $4.30.