The weekly correlation of 0.97 between XRP and Bitcoin indicates that XRP’s decrease was less significant than Bitcoin’s, rather than showing a trend of decoupling.
Over the past month, XRP has experienced a 19% decline against Bitcoin’s 5%, while the trading volume of spot ETFs plummeted from $102 million to $19 million.
Margin shorts for XRP on Bitfinex have reportedly surged to about 300,000 in just under two weeks, raising concerns of a potential short squeeze.
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XRP (CRYPTO: XRP) has seen a minimal drop of just 0.1%, appearing to be one of the more stable large cryptocurrencies. In contrast, Bitcoin (CRYPTO: BTC) decreased by 2%, Ethereum (CRYPTO: ETH) reduced by 3.4%, and Solana (CRYPTO: SOL) dropped by 2.8%. With XRP trading at $1.30 and Bitcoin around $80,268, some investors are speculating on the potential for XRP to decouple from Bitcoin.
Even with its stable weekly performance, the correlation with Bitcoin suggests otherwise. In fact, the daily returns of XRP over the last week demonstrated a solid correlation of 0.97 with Bitcoin’s movements, showing they behaved similarly during this timeframe. The correlation remains steady over extended periods: 0.91 over 30 days, 0.89 over 90 days, and historically at 0.85.
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This indicates that while XRP’s weekly performance seems steady, it has largely mirrored Bitcoin’s movements instead of exhibiting true independence. Are investors witnessing a genuine separation, or is XRP merely declining at a slower rate than Bitcoin?
Insights from XRP’s 0.97 Correlation with Bitcoin
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Correlation assesses how two assets fluctuate together based on their daily returns—the percentage change between consecutive closing prices. A correlation of 1 indicates that both assets increase or decrease simultaneously, while a figure close to zero suggests a weak relationship.
Correlation specifically tracks directional movements rather than the magnitude of price alterations. Therefore, if XRP experienced a less severe decline than Bitcoin on certain days, it could still maintain high correlation due to their simultaneous movements.
Market participants keep an eye on these correlations, as a decrease can signify a divergence between two assets. Unfortunately for XRP, the current metrics indicate it has aligned even more closely with Bitcoin over the past week. Its apparent stability seems more a result of dropping less during a broader downturn rather than establishing a distinct trajectory.
XRP’s Steady Week Masks a Rough Month Ahead
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Despite XRP’s slight weekly variation, its monthly performance reveals a starkly different situation. In the last 30 days, XRP has declined by 18.8%, whereas Bitcoin has only seen a modest decline of 5%. Year-to-date, XRP’s drop stands at 29.1%, in contrast to Bitcoin’s lesser fall of 7.7%.
Over the past year, XRP has lost 49.8%, while Bitcoin has fared better with a reduction of just 27.7%. This trend indicates that XRP often tracks Bitcoin closely, but typically experiences sharper declines during downturns.
A stable performance following a month of significant losses could imply reduced selling pressure. However, it might also indicate waning trading activity. For instance, the trading volume for spot XRP ETFs was only $18.8 million on October 23, a stark drop from over $102 million recorded on October 2.
The only hint of a potential shift occurred in the 24 hours leading up to October 25, when XRP increased by 1.4% while Bitcoin saw a decline of 0.4%. However, such a one-day swing has minimal impact on the broader 30-day correlation.
ETF Movements, Conference Buzz, and Short Sellers Might Influence XRP’s Position Relative to Bitcoin
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One significant factor that could help XRP shift away from Bitcoin is the inflow of funds into spot XRP ETFs, which directly hold XRP. Between October 19 and October 23, these funds experienced a net influx of roughly $4.3 million, with impressive inflows of about $709,000 on October 21 and $3.5 million on October 22.
Nevertheless, the net assets of these ETFs have decreased from $1.77 billion on September 25 to $1.48 billion on October 23, illustrating that price declines have surpassed the inflows. A few million dollars daily are simply not enough to insulate XRP from Bitcoin’s impact.
Additionally, the upcoming Ripple Swell conference set for October 27-29 in New York, alongside XRPL Apex, Ripple’s developer event, might be of importance. While previous conferences have not consistently led to substantial increases in XRP value, any new agreements related to payments or tokenized assets on the XRP Ledger could stimulate demand independent of Bitcoin.
Short selling might offer another avenue. Reports suggest a rise in XRP margin shorts on Bitfinex, elevating from about 148,850 to roughly 300,000 in less than two weeks. While these numbers lack confirmation, an upward movement in XRP could force short sellers to acquire coins back, thus triggering a short squeeze that could boost XRP demand.
Is XRP About to Separate from Bitcoin?
To conclude, XRP has not transitioned away from Bitcoin. As of the week concluding October 25, it has fallen less than Bitcoin while maintaining a close correlation with its movements, leading to a correlation score of 0.97. This relationship underscores that XRP continues to align itself with Bitcoin’s trajectory rather than carving out its own. A single week is insufficient to imply a shift, especially when XRP fell by 18.8% compared to Bitcoin’s modest loss of 5%.
Nonetheless, two factors could potentially alter this situation. First, it is crucial for spot XRP ETFs to see consistent inflows near the $22.6 million registered on September 25, rather than dry days of no inflow observed this October. Additionally, XRP must finish above its 50-day average of approximately $1.41 on days when Bitcoin drops, as this could strengthen its chances of breaking free from Bitcoin’s influence.
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