XRP Short Traders Face Record Losses Following Landmark Court Ruling

Key Points:

• A landmark court ruling drove XRP prices to nearly double over the past 24 hours before receding in early Asian hours on Friday, with XRP shorts losing the most money so far this year.
• XRP-tracked futures traders racked up a total of $58 million in losses as a U.S. judge ruled the sale of XRP tokens on exchanges did not constitute investment contracts. Of that, shorts lost $33 million.
• Crypto exchange Bybit saw the most liquidations at $21 million, followed by OKX at $14 million and Binance at $14 million. Large liquidations can signal local tops or bottoms of a price move.

A recent court ruling has had a significant impact on the XRP market, driving prices up by almost double before falling back again in early Asian trading on Friday.

The ruling stated that the sale of XRP tokens on exchanges did not constitute investment contracts, which has led to some traders losing significant amounts this year.

According to data from Coinglass, traders who had invested in XRP-tracked futures were hit particularly hard, losing a total of $58 million. Of this total, $33 million was lost by those who had bet against price rises, while the remaining amount was lost by those who had bet on price increases. Crypto exchange Bybit saw the most liquidations, with traders losing $21 million, followed by OKX and Binance, both at $14 million.

For those who are not familiar with the term, liquidation refers to when a trader’s position is closed forcefully by an exchange due to a partial or total loss of the trader’s initial margin. This occurs when a trader is unable to meet the margin requirements or does not have enough funds to keep the trade open. Large liquidations can be a signal of a local top or bottom of a price move, which can help traders to position themselves accordingly.

The court ruling that caused the surge in XRP prices came from the District Court for the Southern District of New York, which said that the “offer and sale of XRP on digital asset exchanges did not amount to offers and sales of investment contracts,” as “the record cannot establish the third Howey prong to these transactions.” While XRP saw a significant price increase, the ruling also impacted other cryptocurrencies, such as Solana (SOL) and Cardano (ADA), which also experienced a jump in prices. Traders likely saw XRP’s partial victory as a favorable outcome for the crypto market, which has been targeted by the U.S. Securities and Exchange Commission for allegations of several issuers offering their tokens as securities to U.S. investors in recent months.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.