XRP Buy Signal Shows Shorts in Danger

What to Know:

• Key takeaway #1 — XRP funding rates on Binance mirror patterns seen before sharp price rebounds since 2024, suggesting a potential short squeeze.
• Key takeaway #2 summarizing negative funding rates among leveraged traders betting against XRP, which have historically preceded significant price increases.
• Key takeaway #3 explaining that XRP bulls need to defend the $2 level to maintain bullish momentum, while bears aim to push the price towards $1.40 if key support fails.

XRP funding rates on Binance have recently mirrored patterns observed before significant price rebounds since 2024. The persistent negative funding rates indicate that a large number of leveraged traders are betting against XRP, which historically has led to short squeezes. This setup suggests that XRP could potentially experience a notable price increase in the near term if buying pressure intensifies.

Negative Funding Led to Potential Short Squeezes

Over the past couple of months, Binance funding rates for XRP have largely remained negative, indicating a prevailing bearish sentiment among leveraged traders. This means that a significant portion of traders were actively betting on a decline in XRP’s price, and they were willing to pay to keep their short positions open.

This bearish consensus emerged following a substantial 50% drop in XRP’s spot price from its multiyear peak of $3.66, reached in July 2025. However, according to on-chain analyst Darkfrost, this widespread negative sentiment could backfire on the bears in the coming weeks, potentially triggering a short squeeze and driving the price upward.

Historical XRP Funding Rates and Price Rebounds

Darkfrost highlighted a recurring pattern since 2024 where persistent negative funding rates have preceded sharp price rebounds in XRP. These instances include a 50% surge in August-September 2025 and over 100% gains in April-July 2025. The analyst suggests that the current negative funding rates could lead to a similar outcome.

According to Darkfrost, the accumulation of short positions creates short-term selling pressure but also builds latent buying pressure. If the price of XRP starts to rise, these short positions could be liquidated, further fueling the upward momentum. This dynamic sets the stage for a potential short squeeze, where bears are forced to cover their positions, driving the price even higher.

XRP Bulls Aim to Reclaim $2 as Support

As of January, XRP has shown a modest rebound after testing the lower trendline of its year-long sideways channel, which aligns with the $1.80-$2.00 support area. This zone previously acted as a launchpad for a 100% rally to $3.66 in April 2025, making it a critical level to watch.

The $2 level remains a key psychological threshold for XRP in the short to medium term. Previous analyses by Glassnode indicate that each retest of the $2 area since early 2025 has coincided with substantial weekly realized losses, suggesting that many holders have used these moves to exit their positions and cut their losses rather than increase their exposure.

What Factors are Influencing Institutional Sentiment?

Institutional sentiment toward XRP and the XRP Ledger is influenced by several factors, including regulatory clarity, technological advancements, and market performance. Positive developments in these areas tend to attract institutional interest and investment, while uncertainties or setbacks can dampen enthusiasm.

The broader macroeconomic environment and the performance of other asset classes also play a role. For example, if traditional financial markets are experiencing high volatility, institutions may seek alternative investments like XRP to diversify their portfolios. Additionally, the increasing adoption of XRP Ledger technology by financial institutions for cross-border payments and other applications can further bolster institutional sentiment.

How Does Liquidity Affect XRP’s Price?

Liquidity is a critical factor influencing the price of XRP. High liquidity, characterized by tight bid-ask spreads and substantial trading volumes, allows for efficient price discovery and reduces the potential for large price swings. Conversely, low liquidity can lead to increased volatility and make it more difficult to execute large trades without significantly impacting the price.

Market makers and exchanges play a crucial role in providing liquidity for XRP. They facilitate trading by quoting prices and matching buyers and sellers. Factors such as exchange listings, regulatory developments, and overall market sentiment can all impact the liquidity of XRP, thereby affecting its price dynamics.

Technical Analysis: Key Levels to Watch

From a technical analysis perspective, XRP bears are aiming to push the price down toward its 200-week exponential moving average (EMA), currently around $1.40, if it fails to reclaim its 50-week EMA at $2.22 as support. The 200-week EMA is a long-term trend indicator that often acts as a significant support level.

The “latent-buying-pressure” thesis put forth by Darkfrost would be significantly weakened if XRP decisively loses the $1.80–$2.00 support zone. A break below this level could trigger further selling pressure and potentially lead to a more substantial decline in price. Traders and investors should closely monitor these key levels to gauge the potential direction of XRP’s price movement.

Overall, the funding rates and technical analysis suggest that XRP may be poised for a potential short squeeze, but the bulls need to defend key support levels to maintain their momentum.

Related: XRP Price Signals Key Liquidity Zone

Source: Original article