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XRP investors were put on alert last night after the price briefly dipped below the psychological $2 mark.
Typically, such psychological price levels attract buyers expecting a recovery. Furthermore, signals on the derivatives market usually indicate growing buying interest.
Despite this, buyers remain absent, and XRP is failing to mount a recovery. What is happening with Ripple’s cryptocurrency?
Market Sends Extreme Signal, But XRP Doesn’t React #
On Tuesday, XRP suddenly jumped to $2.18 but was rejected, and the price fell by about 9% over the next two days. This move had an immediate effect on the derivatives market.
On the derivatives market, traders can speculate on the price of XRP through so-called perpetual futures. These are futures contracts without a fixed expiration date.
To prevent the price of these contracts from deviating too far from the actual spot price, traders periodically pay each other a funding rate.
For XRP, this funding rate has dropped to -20%, its lowest level in months. This means that traders betting on a price drop (shorts) are paying those betting on a price increase (longs).
Such an extreme level indicates significant pessimism in the market and could normally provide room for a recovery.
A key reason for the lack of recovery is the absence of new positions. The open interest, the total amount of outstanding trading positions, has been hovering around €2.23 billion for days with barely any movement.
This shows that hardly any new positions are being opened and that traders have little appetite for taking big risks. Both bulls and bears seem to be waiting on the sidelines.
This caution is logical on the short side. XRP has already fallen by about 45% since its peak in July. For many traders, the risk of opening additional short positions now simply feels too great. At the same time, there is a lack of confidence to go long.
XRP Development Stalls #
It’s not just the derivatives market that looks weak. Fundamentally, XRP is also getting little support. The U.S. XRP exchange-traded funds (ETFs) launched in November with high expectations.
The initial inflows drew attention, but they have since tapered off, and assets under management have stalled around €2.64 billion. Daily volumes are low, giving large players little reason to get involved.
There is also little activity on the XRP Ledger itself. The total value locked (TVL) has fallen to approximately €57.9 million, its lowest point this year. This is remarkable, especially since smaller networks are showing more activity. Even Ripple’s own stablecoin, RLUSD, runs on Ethereum, not on the XRP Ledger.
Due to low network activity and declining ETF interest, there is a clear lack of reason to hold XRP. Without growth or development on the network, buyers remain on the sidelines.