Analysts are concerned that XRP futures contracts could weaken XRP's price. While some see this as a step towards broader acceptance, others warn that cash-settled futures contracts could pave the way for market manipulation, potentially leading to significant price drops similar to historical patterns observed with Bitcoin (BTC) and Ethereum (ETH).
This debate arose in the context of the Chicago Mercantile Exchange (CME) launching XRP futures on May 19.
How Will XRP Futures Affect the Price?
In a recent post on X (formerly Twitter), a pseudonymous analyst named Pumpius warned that XRP futures could be a "trap." He emphasized that these financial tools allow large players to manipulate prices through strategies like naked short selling and rehypothecation.
"You want legitimacy. Wall Street gave you leverage. It's the same scenario used to manipulate gold and silver for decades. No need to dump coins. Just flood the system with virtual contracts, suppress the price and profit from the decline," Pumpius posted.
The analyst explained that in naked short selling, institutions can open large short positions on XRP without owning the token. This creates artificial selling pressure that can suppress the price.
Moreover, he noted that "whales" typically time their short positions around CME futures contract expiration. This leads to price drops while allowing them to profit. He used Bitcoin as an example, highlighting that it often drops around 2.3% near previous CME futures expirations.
"Now apply that to XRP: Each CME expiration becomes an opportunity to attack the price downward. Smart traders will start tracking the CME calendar more than charts," he added.
Besides naked short selling, the analyst also discussed rehypothecation. In this practice, an XRP deposit can support multiple short positions, enhancing market leverage.
This could lead to additional hidden pressure on the price, as the existing XRP supply remains unchanged while the leverage behind these positions multiplies. These combined strategies suggest that XRP's price could experience significant drops, especially around futures contract expirations.
"Naked short selling is legal in futures contracts. Rehypothecation is legal in traditional finance. Dark pool trading and lending liquidity are standard institutional tools. So when XRP volatility spikes near futures contract expiration, it won't be coincidental. It will be precise finance, disguised as market behavior," Pumpius stated.
Historical data supports these concerns. Another analyst, AJ Sallen, revealed that when CME introduced Bitcoin futures on December 18, 2017, BTC's price initially rose to $19,783. However, it dropped to $13,800 by December 22, marking a 30% decline.
A similar pattern occurred after CBOE launched Ethereum futures in 2018, with prices dropping sharply.
"Futures contracts enable short selling, and profit-taking after the hype caused the correction," Sallen commented.
Despite these concerns, many remain optimistic that XRP futures will increase liquidity and pave the way for XRP spot ETF approval.
"XRP futures regulated by CFTC. XRP spot ETF is just a matter of time," Nate Geraci, President of ETF Store, commented.
XRP Price Performance. Source: BeInCryptoCurrently, XRP has not experienced any significant decline. Data from BeInCrypto shows the altcoin has increased 2.1% in the past day. At the time of writing, XRP's trading price is $2.3.
