Positive momentum is reshaping the discussion around the crypto sector, once again. For meme projects such as Shiba Inu (CRYPTO:SHIB) and Dogecoin (CRYPTO:DOGE), this has materialized into some rather impressive gains. As of 11 a.m. ET, these two meme coins had appreciated 9% and 6.5%, respectively, over the past 24 hours.
Forced liquidations of these meme tokens have driven most of the incredible volatility with Shiba Inu and Dogecoin in recent days. For Shiba Inu in particular, liquidations of the SHIB, 1000SHIB, and SHIB1000 contracts have been more than 80% on the short end of this trade, according to the website Coinglass, which tracks this data. This means that those shorting this meme token are increasingly having their positions liquidated, forcing the price of SHIB higher, in a similar fashion as short-covering in the stock market.
For XRP (CRYPTO:XRP), today’s gain is slightly more muted than its meme token peers. As of 11 a.m. ET, XRP shot 3.2% higher over the past 24 hours, as this token maintains positive momentum following news last week that the project’s parent company Ripple may be close to concluding its ongoing litigation with the SEC that’s spanned more than a year.
Forced liquidations continue to drive a significant percentage of the overall volatility in the market. At 11 a.m. ET, over the past four hours, Shiba Inu, Dogecoin, and XRP took 3rd, 4th, and 5th place in terms of forced liquidations (mostly short-related), after Bitcoin and Ethereum. This signifies, among many things, that these three tokens are among the most-traded in the market, and investors appear to be most bullish on the near-term prospects of these projects.
For XRP, investors appear to be banking on some sort of litigation resolution or near-term even that could drive short-term volatility with this token. In general, the market has viewed recent news that the judge overseeing the SEC vs. Ripple case has allowed for documents to be unsealed a small victory for the XRP camp. While the outcome remains uncertain, crypto investors (like all investors) like certainty. Thus, a resolution (good or bad) to this saga is being priced into the coin with positive effects right now.
Interestingly, these three tokens are among the highest-flyers in the crypto market over the past week. Unlike previous rallies, which saw these tokens give up a majority, if not all, of their gains in short order, this week has provided somewhat “stickier” returns for investors. Accordingly, outside investors may be wondering whether the near-term catalysts driving these tokens higher can be maintained for an extended period of time.
I think the jury is still out on with respect to this idea. However, given the macro environment we’re in now, it’s likely the crypto market will continue to see volatility from here. Accordingly, investors should fasten their seatbelts — this ride may get a lot bumpier from here.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.