XRP Open Interest Signals Potential Shift

What to Know:

• XRP’s derivatives market shows significantly reduced open interest, suggesting a clearing of over-leveraged positions and a more stable market structure.
• This reset occurs amid broader crypto market weakness and follows a period of price decline for XRP, raising the possibility of a trend reversal driven by spot demand.
• The reduced leverage and potential for spot-driven recovery could positively impact XRP liquidity and price stability, especially if institutional interest remains strong.

XRP has experienced a notable price decline recently, mirroring the broader crypto market’s volatility. However, a closer look at the derivatives market reveals a significant reduction in open interest, signaling a potential shift in market dynamics. This reset may pave the way for a more sustainable recovery driven by genuine demand rather than speculative leverage.

Derivatives Market Reset

Open interest (OI) on Binance for XRP has plummeted to levels not seen since November 2024, currently sitting at $406 million. This sharp decline indicates a substantial reduction in leveraged positions, likely due to liquidations and traders closing positions in response to recent price drops. According to CryptoQuant analysis, such a reset typically reduces the market’s vulnerability to volatility from long or short squeezes, fostering a more stable environment.

Technical Indicators Suggest Oversold Conditions

Additional signals point to potential oversold conditions. Crypto analyst Egrag Crypto noted that XRP’s macro relative strength index (RSI) has rapidly fallen into the 45-50 zone, a level historically associated with price bounces. The analyst suggests that the observed selling pressure does not appear to be retail-driven but rather reflects distribution by larger holders during liquidity sweeps. This RSI behavior is characterized as a “full reset phase” rather than a bearish signal.

Historical Support Levels

Egrag Crypto also highlighted that the 45-50 RSI range has acted as a macro support level in every previous XRP cycle, remaining unbroken. This compression phase typically flushes out weaker positions, resets momentum, and sets the stage for expansion. A bearish scenario would only materialize if the RSI falls below approximately 43.

Institutional Interest in XRP ETFs

Despite broader market outflows, US-listed spot XRP ETFs saw inflows of $19.46 million on February 3rd, according to SoSoValue. The XRPZ Franklin XRP ETF led with $12.13 million in inflows, followed by Bitwise’s fund with $4.8 million and Grayscale XRP Trust ETF with $2.51 million. In comparison, Bitcoin ETFs recorded net outflows, while Ethereum ETFs attracted smaller inflows, positioning XRP funds as relative outperformers during this period.

Potential for Spot-Driven Recovery

With the derivatives market reset and technical indicators suggesting oversold conditions, XRP may be poised for a recovery driven by spot demand. Reduced liquidation pressure means that future price movements are less likely to be exaggerated by over-leveraged positions. Increased spot demand, potentially supported by continued institutional interest, could lead to a more natural and sustainable price recovery for XRP.

Related: XRP Price Signals February Target

Source: Original article