The price of Ripple, the fifth largest cryptocurrency by market cap, doubled in a matter of hours on July 13th. The reason for this sharp surge was a court ruling that XRP is not a security in and of itself. This was good news to crypto enthusiast, since it means Ripple falls outside of the SEC’s purview and should therefore not be regulated by the Commission.
Unfortunately for the bulls, XRPUSD has now given up more than half of its post-ruling gains. The token reached $0.9480 on July 13th, but trades just over $0.6310 as of this writing. Is this a second chance to buy the dip, or the beginning of a bigger selloff to new lows? Let’s try and find out with the help of the daily chart below.
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Here, we’ll examine the recovery from the low at $0.2870 in mid-June, 2022. The chart shows a familiar Elliott Wave structure – an A-B-C flat correction, where wave B is a triangle. The sharp rally on July 13th fits in the position of wave C, thus completing the corrective pattern. The theory states that once a correction is over, the preceding trend resumes. Ripple was clearly in a downtrend prior to last month’s court ruling, hence the current slide.
What is interesting, though, is how clearly this chart demonstrates the fractal nature of financial markets. A fractal is a pattern which consists of the same ever-repeating shape on every scale. In the case of Ripple, note that wave A has the same structure as the larger pattern it is part of. Wave A is an (a)-(b)-(c) flat correction with a triangle in wave (b). It fits into a larger A-B-C flat correction with a triangle in wave B. If this count is correct, Ripple is likely to keep falling. Downside targets below $0.2870 make sense going forward.
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