Bitwise XRP ETP Filing Can Make it the Third Major Asset With Traditional Finance Exposure!

Bitwise Asset Management's announcement of their filing for an XRP ETF on Tuesday was significant news in the crypto world, highlighting increasing integration of digital assets into traditional finance. The next day, Bitwise announced an ETP (Exchange-Traded Product) filing, a broader category offering more regulatory flexibility that XRP was able to file as a result of being deemed a non-security. While both products track XRP's price, the shift to an ETP might help Bitwise navigate the challenges faced by cryptocurrency ETF's, increasing its chances of an SEC approval later this year or in early 2025.

The market response to this news was mixed, with some initial excitement and a huge social volume spike. Santiment's social data shows that the discussion around "XRP ETF" spiked back on August 7th, suggesting strong enthusiasm from traders after rumors began to look realistic. In this case, XRP did see a boost following the initial filing (with the aid of all of crypto rebounding following a crash on August 4th and 5th). And we can clearly see that this is the most discussion related to XRP since that spike from 2 months ago.

Following Bitwise's announcement, on-chain data has revealed a spike in XRP transaction volume, reaching an 8-month high of $2.39 billion shortly after the filings. This surge in volume indicates increased activity, likely tied to both traders' reactions to the news and institutional accumulation. With such high volumes, the market sentiment can be volatile, and traders need to be cautious of potential short-term corrections.

Santiment’s on-chain metrics also show that XRP's 30-day MVRV (average returns of XRP traders active in the last 30 days) are at -9.2%, marking the lowest point in two months. Historically, such negative sentiment and low returns can represent an "opportunity zone," where the market is under pressure, but risk is relatively limited. This is often when savvy investors look to accumulate, anticipating a rebound once the negative sentiment wanes.

Adding to the bullish signs, there were 145 whale transactions exceeding $1 million in value on October 1, a notable 6-month high. Whale activity often indicates that larger investors are either accumulating or positioning for a strategic move, suggesting that these players see value in XRP at its current price. Such whale transactions frequently precede market moves and can be a strong signal for smaller investors looking for cues on market direction.

And as you may expect, the ratio of positive vs. negative comments on social media related to XRP have shown an overwhelmingly bullish pattern, peaking on October 1st following the initial announcement of the ETF filing (and before the ETP filing).

Nevertheless, we always warn that markets typically move the opposite direction of crowd expectations. When the crowd is overly excited, prices are more likely to correct. The enthusiasm around the initial XRP ETF announcement, followed by the shift to an ETP, may have inflated short-term optimism. This means a potential retracement could occur if expectations don’t align with market reality or if the SEC's stance on the product hardens.

Price-wise, the initial hype pushed XRP’s value up, but as seen in the past with Bitcoin and Ethereum ETF's, enthusiasm can be short-lived if prices tank after the initial announcements, the SEC's decisions on the filings get delayed, or actual adoption does not meet investor expectations.

The updated filing also comes at a delicate time for XRP and Ripple. With the SEC’s October 7th deadline approaching for appealing the 2023 court ruling on XRP’s legal status, the shift from an ETF to an ETP might serve to reduce regulatory risks. Ripple has been battling the SEC since 2020, and any appeal or subsequent ruling could have implications for how the SEC treats products like this ETP.

Bitwise's shift from an XRP ETF to an ETP filing could prove advantageous in dealing with regulatory hurdles, but traders should be wary of market sentiment shifts. While whale activity, a spike in transaction volume, and the current negative average returns indicate a possible bullish picture, the actual rally that traders are hoping for may not happen until, ironically, the crowd hope dies down and turns into mild to severe frustration and impatience.

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Disclaimer: The opinions expressed in the post are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.