XRP Funding Levels Drop To Extreme Negative Levels, What This Means For Price

Overview

XRP’s derivatives markets are currently experiencing significant bearish pressure, as evidenced by negative funding rates across major exchanges. This trend indicates a notable shift in market sentiment, with implications for the future price action of XRP. The recent data suggests potential turning points or further declines for the cryptocurrency.

Bearish Derivatives Positioning Shows In Deeply Negative Funding

Recent real-time funding metrics from Coinglass reveal that XRP’s average funding across major exchanges has fallen into negative territory. In the latest trading sessions, the lowest funding rate observed was around -0.0748%. This development indicates that short positions are dominating market sentiment, with bearish bets outweighing bullish ones across exchanges. In practical terms, negative funding rates mean that perpetual futures shorts are compensating longs, reflecting an overcrowded short exposure.

Historically, heavily negative funding can signal a potential turning point, particularly if the price begins to stabilize. In such cases, short sellers may be compelled to cover their positions, which could lead to price rebounds. Technical analysis shared on social media by a crypto analyst highlights that XRP’s aggregated funding rate, weighted by open interest, has reached deep negative territory on a weekly timeframe. This metric is currently at its lowest level since late 2022, only surpassed by the week of the FTX crash in November 2022. Interestingly, during that prolonged period of negative funding, a market bottom was established.

Open Interest Returns to Multi-Year Base Levels

Alongside the negative funding rates, open interest in XRP has also seen a significant decline, mirroring the current market sentiment. The weekly aggregated open interest metric is now at levels associated with previous multi-year accumulation bases. This base has been present since October 2022 and has historically acted as a support level. Each time open interest has returned to this zone, it has typically been followed by rebounds to higher levels.

XRP’s price action has faced challenges in establishing a sustainable bottom, primarily due to the broader crypto market’s lack of bullish momentum. Currently, XRP needs to maintain positions above two key support levels. The first support level is around $1.45, where recent daily candles have shown wicks. Below this level, a larger demand area exists, spanning approximately $1.15 to $1.30.

From author

The current state of XRP’s derivatives market presents a complex picture, with extreme negative funding rates suggesting a high level of short positioning. While this situation typically indicates bearish sentiment, historical trends indicate that such conditions can also precede price recoveries. The interplay between funding rates, open interest, and price action will be critical to monitor in the coming weeks as market participants seek clarity on XRP’s trajectory.

Impact on the crypto market

• Negative funding rates indicate a prevailing bearish sentiment among traders, potentially leading to increased volatility.
• Historical patterns suggest that extreme negative funding can precede price rebounds, making the current environment noteworthy.
• The return of open interest to multi-year base levels may signal potential accumulation phases, which could influence future price movements.
• XRP’s ability to hold above key support levels will be crucial in determining the market’s short-term direction.
• The broader crypto market’s lack of bullish momentum continues to impact XRP’s price stability and recovery efforts.