XRP Faces Bearish Outlook Amid Falling Derivatives Demand

The recent trajectory of XRP raises concerns for investors, as key metrics suggest growing bearish sentiment. Despite rebounding from its lows in April, XRP’s performance remains under pressure due to weakening interest in derivatives and a potential technical breakdown.

Bearish Signals from XRP Derivatives Market

The activity in XRP’s derivatives markets signals caution among investors. Since February, XRP perpetual futures have reflected neutral funding rates, meaning there’s no clear majority position between long and short traders. This neutrality typically indicates market uncertainty and can lead to stagnant price movement.

In parallel, open interest (OI) in XRP futures has dropped significantly. As of late May, OI had fallen to $3.2 billion, representing a 9.6% decline from its recent peak of $3.52 billion seen in mid-May. A decreasing OI often points to a reduction in capital engagement, lowering the likelihood of sustained upward momentum.

This waning enthusiasm means that even small waves of selling pressure could tip the balance, triggering liquidations and accelerating price drops. Traders relying on leverage are particularly vulnerable in such scenarios, making a market slide more probable without fresh momentum from institutional or retail participants.

Institutional Pullback Adds to the Pressure

Another sign of deteriorating confidence in XRP comes from the outflow of institutional funds. According to recent data, XRP investment products faced sizable outflows, totaling $37.2 million in a single week and breaking an 80-week streak of positive inflows. This brought the monthly net outflow to $28.6 million.

This decline stands in contrast to other prominent cryptocurrencies, which continued to draw interest. Investment products pegged to Bitcoin, Ether, and Solana experienced respective inflows of $2.9 billion, $326 million, and $4.3 million. The divergence indicates institutions are reallocating resources away from XRP, adding downward pressure.

Less capital from institutional players not only weakens current buying activity but also negatively impacts overall sentiment, making a price recovery more difficult.

Technical Patterns Point Toward Further Decline

The technical chart of XRP adds another layer to the bearish narrative, forming a descending triangle pattern since mid-May. This pattern features a stable support level paired with a descending resistance line, a setup commonly associated with a bearish trend reversal.

If XRP fails to stay above its 200-day simple moving average (SMA), currently at $2.18, it could experience increased selling pressure. Already hovering near $2.31, XRP risks dipping to the pattern’s support line around $2.28. Breaking below this boundary would likely confirm the descending triangle’s implications, potentially leading to a drop toward $1.96, a 16% fall from current values.

This scenario aligns with earlier analysis that warned of dips as far as $1.61 if key support levels gave way. While bearish pressure dominates the technical outlook, a breakout above the resistance near $2.35 (aligned with the 50-day SMA) could invalidate this structure and set the stage for a bullish move toward the $3.00 threshold.

Current Outlook for XRP

XRP’s future hinges on a shift in both institutional interest and market sentiment. Stirred by wavering demand in its derivatives market and rapid capital outflows from investment vehicles, the asset struggles to regain its footing. The presence of a descending triangle pattern suggests that unless buyers step in with force, XRP may descend further in the short term.

For traders and investors assessing the current landscape, XRP presents a cautious picture. The absence of a definitive bullish catalyst and weakening on-chain metrics underscore the need for vigilance. The market awaits a clear breakout or breakdown to determine XRP’s next major move.

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Related: Expert Advice: Sell XRP If You’re Confused

This article does not offer investment recommendations. Each financial decision carries risk and should be made based on individual research and analysis.