A pivotal legal verdict catapulted the price of XRP, causing it to almost double in the span of 24 hours, before a slight pullback during the early hours of Friday trading in Asia. This surge resulted in XRP short sellers recording their highest losses in 2023.
Coinglass data reveals that futures traders tracking XRP accumulated total losses amounting to $58 million. This occurred in the wake of a U.S. judge’s decision that the offering of XRP tokens on exchanges did not equate to investment contracts. Short traders, those wagering on price drops, bore the brunt of these losses with a staggering $33 million, while the remainder was shouldered by long traders.
Cryptocurrency exchange, Bybit, was hit hardest by the liquidations, amounting to $21 million. It was closely followed by OKX and Binance, both recording $14 million each in liquidations. Liquidation is the compulsory closure of a trader’s leveraged position by an exchange when a trader either fails to meet the margin requirements or lacks sufficient funds to maintain the open trade.
Such closures typically occur following a significant loss of the trader’s initial margin. The occurrence of substantial liquidations can often indicate the peak or trough of a price move, providing savvy traders with an opportunity to strategize accordingly.
The dramatic price reaction came in response to a decision by the District Court for the Southern District of New York. The court declared that the “offer and sale of XRP on digital asset exchanges did not amount to offers and sales of investment contracts.” The court further stated that the “record cannot establish the third Howey prong to these transactions.”
In the broader crypto market, the ripple effect of the verdict was felt as Solana (SOL), Cardano (ADA), and other altcoins experienced price hikes. Traders seemed to interpret the XRP’s partial legal victory as a positive sign for the overall cryptocurrency market. This comes at a time when the U.S. Securities and Exchange Commission has been scrutinizing the crypto market for allegations of multiple issuers marketing their tokens as securities to U.S. investors.
