XRP faces risk of liquidation amid Bitcoin dominance concerns

XRP (CRYPTO:XRP) has seen a decline of nearly 18% since reaching its yearly high on December 3, yet traders remain hopeful for a rebound. 

However, this optimism may be challenged if Bitcoin (CRYPTO:BTC) dominance continues to rise, according to crypto analyst Pav Hundal from Swyftx. 

“The real danger right now for highly leveraged XRP bulls is that Bitcoin dominance increases again. A rotation from XRP to Bitcoin would very likely lead to a bloodbath of liquidations,” he stated.

As of now, Bitcoin's dominance stands at 55.30%, a decrease of 5% over the past week, based on TradingView data. 

Some analysts predict that Bitcoin dominance could peak between 60% and 70% before capital starts flowing back into altcoins.

Hundal noted that there has been significant retail buying activity in recent weeks, with open interest in XRP nearly double the levels seen in 2021. 

A mere 7% retracement to $2.18 could result in the liquidation of $104.4 million in long positions.

Hundal expressed concern that the market might be nearing “euphoria territory,” which could lead to increased volatility.

Previously, XRP traded within a narrow range of $0.48 to $0.73 for most of 2024 until a significant rally followed Donald Trump’s presidential win on November 5, pushing XRP to $2.85 by December 3.

On December 5, XRP's open interest reached $3.44 billion, significantly higher than the $2 billion recorded in April 2021 during a similar rally.

Hundal suggested that if Bitcoin stabilises, it “could soothe nerves and spot volumes could pick up again.” 

At the time of reporting, the Bitcoin price was $98,109.83, and the XRP price was $2.34.