Heavy Long Exposure Builds on XRP as More Traders Bet on Price Rebound

XRP has dropped alongside the broader crypto market, but traders continue to open more long positions, expecting a rebound.

XRP has fallen along with the broader crypto market, which has lost nearly $400 billion this week. However, amid the decline, multiple traders are betting on a rebound. 

CryptoQuant analyst Pelinay noted that investors are opening more long positions on XRP as prices drop. This growing confidence may not be a good sign in the short term, as it can lead to a long squeeze when prices drop lower. 

Key Points

• XRP fell with the broader market, which has lost nearly $400 billion this week alone.
• While the price dropped from $1.4 to $1.17, traders increased long positions, as the leverage ratio rose from 0.13 to 0.18.
• Low volatility and high leverage raise the chances of a sharp downside move.
• XRP later hit a yearly low of $1.04 before recovering slightly to $1.08.
• Having lost the $1.10-$1.15 support, XRP needs to maintain the critical $1 mark to avoid panic selling.

XRP Seeing Rising Leverage Despite Price Decline

Pelinay pointed out that leverage is rising while price continues to fall, and this is a major concern. Specifically, XRP’s price dropped from about $1.40 to $1.17, but the Estimated Leverage Ratio increased from 0.13 to 0.18 during the same period. This shows that traders are taking on more risk instead of stepping back.

Meanwhile, funding rates stayed mostly negative, which means there is still strong short interest in the market. However, XRP has not managed to bounce back in any sustainable way. Normally, negative funding can support a price recovery, but in this case, the lack of movement suggests that the market remains weak.

Rising leverage, falling prices, and negative funding can create an unstable market condition when they occur together. They show that many traders are expecting a reversal, but the market is not yet supporting this sentiment.

XRP’s Long Squeeze Risk

As more traders open leveraged long positions, the chance of a long squeeze increases. If prices keep falling, even slightly, it could trigger liquidations across the market. This can lead to sharp and fast price drops as positions are forced to close.

Pelinay also mentioned XRP’s volatility. The Average True Range (ATR) is near its historical lows, which means price movement has been very tight. Such periods often come before a big move. Based on current signals, the next move is more likely to be downward than upward.

Low volatility alongside high leverage is a risky combination. According to Pelinay, it often leads to sudden and strong price swings, especially when the market is already showing signs of weakness.

Key XRP Support Levels

The analyst highlighted important support levels to watch. The first key range was between $1.10 and $1.15, with XRP trading just above it at the time. Below that, the next support sits at $1.00, which represents an important psychological level.

Following the analysis, XRP dropped further and hit a new yearly low of $1.04. It then saw a small recovery as buyers stepped in around the $1 level. Despite this bounce, XRP is now trading at about $1.08. This marks a 7.6% drop since the analysis and an 18.71% decline over the week.

Now that XRP has lost the $1.10 to $1.15 support range, the $1 level has become even more important. If the price falls below $1, it could trigger panic selling and push the price down faster.

Pelinay noted that the market has not confirmed a bottom yet. For a stronger recovery to play out, a few things need to happen. First, leverage should start to fall, showing that traders are reducing risk. 

Second, funding rates should turn more negative before returning to normal levels. Finally, XRP needs to reclaim and hold above the $1.10 to $1.15 range. Until these signs appear, the market remains at risk.