Crypto traders pile into leveraged positions following Ripple ruling

A lone trader is responsible for throwing an Aave pool akilter, while open interest soars

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JLStock/Shutterstock modified by Blockworks

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In the wake of Ripple’s historic court ruling, crypto traders have turned on the leverage.

A New York court judge ruled on Thursday that XRP cannot be considered a security in secondary sales on exchanges. The ruling simultaneously found, however, that institutional sales of XRP could be considered securities offerings. 

Despite the mixed messages, shortly after the news broke, traders responded by piling into leveraged positions. 

Open interest for Ripple’s XRP, according to data provided by Coinglass, increased a staggering 99% on a 24-hour basis across major exchanges to a total of $1 billion in outstanding contracts. 

Ether, meanwhile, has booked an increase of 16% in open interest, up to $6.77 billion in contracts, while fast risers MATIC and ADA are up 30% and 20%, respectively, to a cumulative $3.32 billion in contracts. 

Spot XRP has soared 77% by publication, leading the charge for an explosive market-wide rally

Aave markets roiled

The levered-up mania was not limited to centralized services: A lone trader singlehandedly pushed interest rates for Aave v3’s USDC pool as high as 43%. Fellow stablecoin DAI, meanwhile, sits at just 4.05%. 

In a series of dozens of transactions over the course of two hours Thursday afternoon, a single address built up an $8 million USDC debt on the lending platform with $11.5 million in stETH collateral. 

The user in several transactions would withdraw USDC, swap to ETH, convert to stETH, then deposit the stETH to enable more borrowing power. 

The outlier position pushed Aave’s v3 $243 million USDC pool well above the optimal utilization rate of 90%, causing interest rates for borrowers and lenders to skyrocket. 

As of publication, the rate for depositors stood above 37%. Aave’s overall total value locked (TVL) has climbed $300 million to $9.3 billion on the day. 

While traders have responded to the XRP outcome with rising bullish bets, multiple legal observers have opined that, in reality, the news may be a mixed bag for digital assets. 

“A word of caution: that order in the Ripple case is a partial summary judgment from a single district court judge. While persuasive, it’s not binding precedent on other courts and will likely be appealed and could be reversed,” wrote Brown Rudnick LLP partner Stephen Palley on Twitter. “Don’t yolo into anything based on that decision.”


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