Most cryptocurrencies follow traditional market and chart principles remarkably well. Ripple’s XRP is a great illustration of this. It has respected in recent years and months the old principle ‘the longer the base, the higher in space.’ Read in this article why this principle is long term bullish for Ripple’s XRP, and how ‘the longer the base, the higher in space’ underpins our Ripple XRP forecast and why XRP will become the largest cryptocurrency.
Let’s apply old market wisdom to new assets: cryptocurrency, in particular Ripple’s XRP token.
When it comes to Ripple’s XRP we believe this old saying is highly relevant: ‘the bigger the base, the higher in space.’ Essentially, what this means is that the longer a sideways consolidation period the more bullish power because there are less sellers in that market.
It may not be clear to many, it may sound strange, but crypto markets follow amazingly well classic chart principles. The only reason why it might not be clear is that things move 10x faster in crypto land. They also move 10x higher. Hence, there is 10x more emotion involved in crypto investing.
How comes, and what does it mean for crypto investors?
Ripple XRP: the longer the base, the higher in space
In our 100 investing tips we dedicated a whole section to the principle ‘the bigger the base, the higher in space’. In sum this is what stands out in terms of why and how this principle works.
- Whenever prices reach the upper end of the range sellers take action. But when prices get down to the bottom of the range buyers step up. This goes on for a longer than average period of time until it resolves itself in one direction or another.
- Consolidations are very frustrating both for traders and investors. The vast majority of market participants show no patience. They sell with a loss, only to forget about the particular opportunity. Mostly, when they return, they feel frustration that they missed the opportunity only to find themselves chasing prices higher.
- Essentially, during sideways trading, sellers tend to leave the market with every peak that is set. If a consolidation goes on for a long time there are hardly any sellers left. That’s the ideal market condition to create a new bullish trend.
- The psychology behind this has to do with the fact that participants are just worn out of that market and recognize the opportunity cost they’ve had to endure while waiting for a resolution. By the time the market breaks out, it’s just been too painful to remain in the trade. And that’s when Mr. Market resolves in an explosive move.
- One recurring characteristic is the ‘false breakdown’ right before the explosive breakout takes place. This is where the saying applies “from false moves come very fast moves in the opposite direction.
If there is one cryptocurrency that has followed the rule of ‘the bigger the base, the higher in space’ it really is Ripple’s XRP.
It is pretty easy to recognize this pattern, though the right chart view and timeframes is required. Below is the weekly chart of XRP since its inception. Essentially, the majority of time XRP has been moving in a sideways pattern. For 18 months between summer 2014 and April 2017 it moved in a range between $0.0035 and $0.011.
As the saying goes ‘the bigger the base, the higher in space’: the base was big so the subsequent space was high.
Right now we see XRP moving in the $0.30 to $0.60 area for 8 months. XRP bulls pray that this consolidation goes on for another 12 months. The subsequent rise after this long base would be enormous, and would send XRP at a minimum to our projected target of $20.
If there is one crypto that follows the rule ‘the bigger the base the higher in space’ it is XRP. #Ripple’s XRP bulls pray that this consolidation goes on for 12 more months. The subsequent rise would send #XRP at a minimum to our… Click To Tweet
The only prerequisite is that XRP does not close below $0.30 for 3 consecutive weeks. That’s the only condition that’s required to qualify as the best blockchain investment for 2019 and 2020.
XRP Fundamentals favorable for ‘the longer the base, the higher in space’
Fundamentally, the picture for XRP looks awesome. Although XRP has not (yet?) decoupled from Bitcoin and the rest of the crypto space it continues on its path of creating momentum. Again, this is fundamental momentum.
There are some great data points in this xrpcommunity article, a big shout out to the author collecting these statistics.
Fundamentals: Statistics on adoption and performance
- Size of Sponsoring Organization (Ripple): > 300 Employees | 7 worldwide offices | > 200 Customers
- Number of official xRapid Partners: 8
- Number of official xRapid Exchanges: 4
- Number of banks using xRapid (on production): 1
- Number of credit unions using xRapid (on production): 1
- Number of remittance processors using xRapid (on production): 6
- Throughput: 1,500 Transactions Per Second On-chain
- Settlement Time: 4 Seconds
XRP unleasing different types of use cases and disruptive services:
- xRapid: Very Large (market is measured in trillions)
- Coil: Micropayments & Web Monetization is an unknown, but large market (estimated in billions)
- Codius: Smart contract market could be large, but currently unknown
- Applications: Large potential for retail & banking applications such as the XRP Tip Bot, Escrow Functions, or Sharing Economy Applications
We believe that the fundamentals will support XRP building a long and strong base because it will favor liquidity and, with this, credibility. This will be the basis for another upward move in 2019 or, preferably even, 2020.
Ed. note: Want to know more about which cryptocurrencies to hold, and how we rank XRP? Get access instantly to our crypto & blockchain investing research with 80 alerts, 4 successful trade alerts in Dec and Jan. Get access now >>
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