XRP’s ride through the cryptoverse has been a rollercoaster. It’s a world defined by extreme price fluctuations, fierce regulatory clashes, and persistent fears of fraud and market manipulation. DreamingCrypto takes a look at the often rocky history of XRP. Read our full analysis to see what manipulation tactics they’re considering and how to look out for them in the broader crypto marketplace. Follow the signs, read the runes, and hop aboard the wave of the decentralized future.

XRP's Explosive 2017 Rally

Perhaps the most publicized XRP event of all time is XRP’s monumental late 2017 price spike. In just over two weeks, XRP’s price exploded from $0.15 to an incredible $3.30, a 20 times increase. Few anticipated this dramatic and explosive increase, creating excitement and speculation across the whole crypto community. Was that a true reflection of market demand, or was there more to it?

The extreme pace and size of the rally was hard to miss. Such quick appreciation is very rare, even in the boom and bust markets of cryptocurrencies. Skeptics like J.K. pointed to the absence of any significant news or developments that would warrant such a sky-high increase. This raised alarms for many about whether the rally was driven by legitimate, coordinated buying activity or some form of manipulation.

Adding fuel to the fire, data aggregator CoinMarketCap decided to do something very tone-deaf in the midst of all this. Then they suddenly pulled pricing out from a slew of Asian exchanges. These exchanges happened to be the ones reporting the most XRP trading volumes during that time. This decision sparked widespread protest and contributed to accusations of market manipulation. It did this by concealing the real picture of XRP’s trading volume and possibly by generating manufactured scarcity.

Evidence of Market Manipulation

Patterns of Accumulation and Price Suppression

New data from on-chain analytics firm Glassnode paints a fascinating picture of XRP accumulation and price suppression. What these patterns show is that there were actors who were possibly and likely attempting to manipulate the price of XRP down. Simultaneously, they are accruing tons of the token itself.

Discrepancy in Partnership Claims

Ripple has long promoted its robust network of banking partners, leading with the claim of “more than 300” banks. A bit deeper analysis exposes that reality of how much we’ve really grown our partnerships under the hood. This mismatch raises troubling questions about the truthfulness of Ripple’s public claims. This would imply that the company didn’t manage to inflate its adoption rate to prop up market sentiment after all.

Unusual Trading Activity

The XRP market has already undergone a number of recent suspicious trading activities, amplifying the case for manipulation. For instance, a rapid, unexplained price change – like the massive decrease from $2.57 to $1.76 in three hours – should set off alarms. Such extreme and sudden price swings are usually a sign of coordinated sell-offs or other manipulation schemes.

Tools for Identifying Market Manipulation

On-Chain Data Analysis

Analyzing on-chain data can be a powerful tool to remove the veil that masks suspicious trading patterns. You can detect wash trading, pump-and-dump schemes, and other trade-based manipulatory behaviors. You can actually get a good sniff of the transaction history, wallet activity, and other transactional activity on the blockchain itself.

Heuristics-Based Approaches

Heuristics, or rules of thumb, can help traders flag potentially manipulative trading activity. One heuristic flags addresses that both buy and sell the same asset in rapid-fire succession. More specifically, it looks at those in a 25-block or five-minute walk time. A second heuristic identifies addresses that accept or make several hundred such trades in a month or two.

Token Multi-Senders

Token multi-senders, which let users send tokens to multiple addresses all at once, can be used to artificially inflate market prices. You can track potential coordinated buying or selling activity by flagging tokens that are sent to multiple addresses from multiple senders. This technique is an important part of detecting illicit trading activity.

Volume Analysis

Further, analyzing trading volumes can identify when wash trading is likely occurring. This manipulative tactic consists of traders simultaneously buying and selling the same asset while inflating price to create fake-looking volume. Using some of these basic primitives, you can identify possible cases of wash trading by calculating the following metrics. Average suspected wash trade and maximum volume per address washed data.

DEX Trade Volume Analysis

We can examine trade volumes on decentralized exchanges (DEXs) as well to uncover potential manipulation. By calculating the percentage of suspected wash trading volume relative to total DEX trade volume, it's possible to identify exchanges that may be more susceptible to manipulation.

The SEC Lawsuit and Its Impact

Price Impact

The SEC's lawsuit against Ripple in December 2020 had a significant impact on XRP's price. Ripple’s defense rested on the argument that XRP was never an unregistered security. This bombshell allegation rocked the entire crypto market and led to a precipitous drop in the value of XRP.

Market Uncertainty

The lawsuit produced a far-reaching chasm of uncertainty around XRP’s regulatory status. Consequently, many exchanges in the U.S. either delisted XRP or halted trading, exacerbating the price drop. Fearing the potential of a negative legal outcome, investors sold off XRP causing prices to plummet.

Partial Victory and Ongoing Scrutiny

In 2023, Ripple won an important partial victory in its ongoing litigation with the SEC. A federal judge recently ruled that XRP, when sold on open markets, is not a security. The SEC has chosen to appeal that decision. XRP remains heavily scrutinized by regulators, resulting in continued concern on what’s next for XRP.

Global Traction vs. US Operations

Though the regulatory environment has been quite difficult in the U.S., XRP has seen incredible adoption and usage across the globe. That uncertainty over its legal status in the U.S. has created major holdups. This has hampered Rocket’s ability to expand its partnerships and operations into that lucrative market.

Conclusion

XRP’s saga has been defined by boom-and-bust cycles, legal scrutiny from the SEC and ongoing allegations of price manipulation. While it's impossible to say definitively whether XRP's price has been manipulated, the evidence suggests that it's a possibility that investors should consider. By understanding the potential tactics used by manipulators and utilizing the tools available to identify suspicious activity, investors can make more informed decisions and protect themselves from potential losses. The magic, mystique, and promise of the cryptoverse awaits—porous protocols, daring unicorns, and Web3 harbingers abound, ready to storm the crypturiverse. Continue to follow the breadcrumbs, interpret the runes, and surf the swell of the decentralized epoch.