XRP price has lost momentum recently and crashed from this month’s high of $3 to $2.20. This trend may soon end if the Securities and Exchange Commission (SEC) moves ahead and approves the 16 spot Ripple ETFs that have been applied. This article explores a near risk-free trade idea if the SEC approves these ETFs tomorrow.
XRP Price Could Rise if SEC Approves Ripple ETF
XRP, the third-biggest cryptocurrency, has seen increased demand from retail and institutional investors lately. One sign of this is the fact that it has had the most spot ETF applications this year, totaling 18. Wall Street companies like Bitwise, Grayscale, Canary, and Fidelity have all applied for these funds.
Odds of these ETFs have jumped in the past few months, moving from 59% in January to 85% today. These odds have remained elevated after the SEC ended its Ripple appeal this month.
Analysts expect the XRP price to explode higher in case of approval. One analyst hinted that the price of Ripple would jump to $5, while another one sees XRP hitting $8. These forecasts point to big swings ahead for a coin trading at $2.2.
Trade Idea for Ripple for the Ripple ETF Approval
Traders have several strategies to anticipate the potential XRP ETF approval. One of these approaches is just to go long the coin, and hope that the approval will push it much higher after the approval.
The risk with this approach is that the XRP price has formed a head and shoulders pattern on the daily chart. Its head is at around $3.40, while the shoulders and neck are at $3 and $1.94, respectively.
A H&S pattern is one of the most bearish patterns, meaning that a breakdown is possible, especially when it loses the support at $1.9447. This risk exists because it is unclear when the SEC will approve the XRP ETFs.
Another approach is to use long-dated call options to position for the XRP ETF approval. A call option is a trade that gives one a right, but not an obligation to buy an asset at a certain strike price. Consider the following scenario if you expect the Ripple price to hit $3.5 by June 27, when the approval will have happened.
- Strike: $3.50
- Ask price: $0.217
- Delta: 0.32
- Max Risk: $0.217
- Max profit: Unlimited
- Breakeven price at expiry: $3.717
In this case, your risk will be capped and have an unlimited profit potential, if you expect the coin to jump to $3.50.
Another approach is to buy a $4/$5 call spread, where you risk about $0.076 to potentially make $0.924, representing a 12x return if the coin closes at or above $5.
Summary
The upcoming XRP ETF approval may lead to a strong surge in the coming months, and the options market provides better scenarios. As this report demonstrates, the options market provides an ideal opportunity from a risk-reward perspective.
Frequently Asked Questions (FAQs)
The odds are that the coin will jump if the SEC approves a Ripple ETF because of the potential demand from institutional investors.
The SEC is expected to approve a XRP ETF now that it was determined that it is not a security by a US judge.
The best idea is to use options to position yourselves for the ETF approval in the coming months.
crispus
Crispus is a seasoned Financial Analyst at CoinGape with over 12 years of experience. He focuses on Bitcoin and other altcoins, covering the intersection of news and analysis. His insights have been featured on renowned platforms such as BanklessTimes, CoinJournal, HypeIndex, SeekingAlpha, Forbes, InvestingCube, Investing.com, and MoneyTransfers.com.
Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
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