XRP Demand Evaporates: Signals Next Target?

What to Know:

• Key takeaway #1 — XRP is facing renewed downside pressure as derivatives activity and onchain positioning continue to weaken.
• Key takeaway #2 — XRP’s futures taker buy volume on Binance has decreased by 95.7% since July, and its Estimated Leverage Ratio (ELR) has fallen to 0.18.
• Key takeaway #3 — Retail, mid-sized, and large wallets all show negative cumulative volume delta through December, confirming broad-based selling pressure, suggesting potential for further downside unless liquidity improves.

XRP is currently under significant pressure as its derivatives activity and on-chain positioning weaken, signaling a risk-off market sentiment. Despite hovering near a key technical support level around $2.00, XRP struggles to maintain demand, raising concerns about its near-term price trajectory. The decline in futures volume and leverage indicates a lack of confidence among traders, potentially leading to further price drops if the selling pressure persists.

XRP futures demand collapses as liquidity dries up

Data indicates a sharp decline in XRP’s futures taker buy volume on Binance, dropping from over $5.8 billion in July to approximately $250 million. This collapse signifies a substantial reduction in buying pressure, reflecting a broader trend across the altcoin market. The decreased liquidity raises concerns about XRP’s ability to sustain its current price levels.

The taker buy-sell ratio has remained consistently negative, suggesting that sellers have dominated XRP derivatives flow. The lack of sustained bid-side activity, even amidst ETF-related optimism, implies that downside risks remain elevated. This situation highlights the challenges XRP faces in attracting new investment and maintaining its market position.

Why is XRP’s leverage ratio so low?

Binance data reveals that XRP’s Estimated Leverage Ratio (ELR) has declined to around 0.18, marking one of the lowest readings in the current cycle. This drop coincides with XRP’s price slipping from above $3.00 toward the $2.00 level, indicating that traders have actively reduced or closed leveraged positions in response to the prolonged market dip. The reduction in leverage reflects a cautious approach among traders.

While lower leverage reduces the risk of cascading liquidations, it also reflects subdued speculative interest in XRP. These environments often mark transitional phases where markets rebalance before establishing a clearer directional trend. The low leverage ratio suggests that traders are hesitant to take on significant risk, potentially limiting upward price movement.

Profit-taking and wallet data indicate blank order books

On December 11, a 5 to 7-year-old XRP wallet with a cost basis of $0.40 realized over $721.5 million in profit, indicating a large-scale distribution event as the price weakened at the $2.00 level. This profit-taking activity contributed to the selling pressure on XRP, further exacerbating the decline in its price. The significant profit realization underscores the potential for further downside if more long-term holders decide to sell.

Order-flow data from Hyblock Capital reinforces this bearish context, showing that XRP’s cumulative volume delta for December is negative across all participant classes. This data indicates consistent net selling, with no cohort exhibiting sustained buying pressure. The lack of buying interest across different wallet sizes suggests that XRP may struggle to find support in the near term.

How are XRP ETF flows affecting the price?

Despite optimism surrounding potential XRP ETF flows, the cryptocurrency has failed to experience a material revival in demand. The broader market sentiment remains risk-off, with investors showing a preference for more established cryptocurrencies like Bitcoin and Ethereum. The lack of positive ETF-related impact suggests that other factors, such as derivatives activity and on-chain positioning, are currently more influential in determining XRP’s price.

The subdued response to ETF news highlights the importance of addressing underlying issues such as declining liquidity and negative sentiment among traders. Unless these fundamental factors improve, XRP may continue to struggle, even with potential inflows from new investment products. The market’s focus remains on the immediate challenges facing XRP rather than future possibilities.

XRP’s struggle for institutional sentiment

Institutional sentiment toward XRP remains weak, as evidenced by the negative cumulative volume delta across large wallets. The lack of sustained buying pressure from institutional investors suggests that they are hesitant to increase their exposure to XRP, potentially due to regulatory uncertainties or concerns about its long-term prospects. The absence of strong institutional backing further compounds the challenges facing XRP.

The weak institutional sentiment underscores the need for XRP to demonstrate its value proposition and address regulatory concerns to attract more significant investment. Without institutional support, XRP may struggle to achieve substantial price appreciation and maintain its competitive position in the cryptocurrency market. Building trust and confidence among institutional investors is crucial for XRP’s long-term success.

Overall, XRP is currently in a low-demand, low-leverage environment, with data indicating consolidation or further downside unless liquidity conditions improve materially. The cryptocurrency faces significant challenges in attracting new investment and overcoming negative market sentiment.

Related: Bitcoin Analyst Disagrees on Value Claim

Source: Original article