XRP declines persist as ETFs show limited impact

XRP under pressure as exchange reserves surge

The number of XRP coins held across exchanges has increased to 2.7 billion as of Thursday, from 2.67 billion on Monday. Looking back, XRP exchange reserves stood at 2.64 billion on December 29, suggesting holders are transferring the tokens with the intention of selling when the price rises.

According to CryptoQuant, rising exchange reserves indicate higher selling pressure, which could pose an increased risk to price recovery.

XRP Ledger Exchange Reserve - Binance | Source: CryptoQuant

Meanwhile, demand for XRP derivatives has remained weak, falling to $3.98 billion on Friday from $4.08 billion the previous day. The OI peaked at a yearly high of $4.55 billion on January 8, a move that happened a couple of days after XRP rose to $2.42. Further decline in the OI could drive the prices lower.

XRP Futures Open Interest | Source: CoinGlass

Despite the three-day price correction, institutional sentiment remains relatively positive, as reflected in steady inflows into XRP spot Exchange Traded Funds (ETFs).

US-listed XRP ETFs recorded approximately almost $17 million in inflows on Thursday, up from almost $11 million on Wednesday, according to SoSoValue data. The cumulative inflow stands at $1.27 billion, and the net assets at $1.51 billion, indicating steady investor confidence.

Technical outlook: XRP decline persists as $2.00 support holds

XRP is trading at $2.06 at the time of writing on Friday, as headwinds weigh on the cross-border money remittance token. The 50-day Exponential Moving Average (EMA) at $2.08 caps the immediate upside, preserving the bearish bias.

The Moving Average Convergence Divergence (MACD) has crossed below the signal line on the daily chart, while the histogram bars have turned negative, suggesting downward pressure is building. Bearish influence is poised to increase if the Relative Strength Index (RSI) at 50 on the same chart extends its decline below the midline.

However, closing above the 50-day EMA at $2.08 would ease immediate pressure and open room toward the 100-day EMA at $2.20 and the 200-day EMA at $2.32. Failure to reclaim these barriers keeps the path of least resistance downward.

Open Interest, funding rate FAQs

How does Open Interest affect cryptocurrency prices?

Higher Open Interest is associated with higher liquidity and new capital inflow to the market. This is considered the equivalent of increase in efficiency and the ongoing trend continues. When Open Interest decreases, it is considered a sign of liquidation in the market, investors are leaving and the overall demand for an asset is on a decline, fueling a bearish sentiment among investors.

How does Funding rates affect cryptocurrency prices?

Funding fees bridge the difference between spot prices and prices of futures contracts of an asset by increasing liquidation risks faced by traders. A consistently high and positive funding rate implies there is a bullish sentiment among market participants and there is an expectation of a price hike. A consistently negative funding rate for an asset implies a bearish sentiment, indicating that traders expect the cryptocurrency’s price to fall and a bearish trend reversal is likely to occur.

(The technical analysis of this story was written with the help of an AI tool.)