XRP price edges lower as open interest fuels volatility

XRP wobbles as Open Interest steadies

The XRP derivatives market exhibits a steady uptrend in futures Open Interest (OI), supporting positive sentiment and potentially driving demand for the cross-border money remittance token.

According to CoinGlass data, OI, referring to the notional value of outstanding futures contracts, averaged at $8.96 billion on Friday, up from $7.37 billion posted on September 7.

XRP Futures Open Interest | Source: CoinGlass

The uptrend in OI suggests that traders are increasingly opening new short positions, with new, fresh capital into the market amplifying downside risks. The subsequent drop in the price of XRP suggests bearish conviction and the potential for the downtrend to continue in the short term.

Technical outlook: XRP faces increased downside risks near $3.00

XRP falls toward the short-term $3.00 support at the time of writing on Friday, reflecting fresh risk-off sentiment in the broader cryptocurrency market. A correction in the Relative Strength Index (RSI) to 52 after topping out at 57 on Wednesday implies fading bullish momentum. A continued drop into the bearish region below the midline would affirm the growing bearish sentiment and increase the chances of XRP sliding below the $3.00 support.

The SuperTrend indicator, positioned above the XRP price on the daily chart, displays a sell signal, suggesting that investors reduce their exposure or focus on increasing short positions. As a measure of market volatility, the SuperTrend serves as a dynamic resistance. Therefore, downside risks could persist as long as the SuperTrend remains above the XRP price.

XRP/USDT daily chart

A break below the $3.00 short-term support could see traders shift their attention to the 50-day Exponential Moving Average (EMA) at $2.95 and the 100-day EMA at $2.83.

Still, the Moving Average Convergence Divergence (MACD) indicator reinforces a subtle bullish grip, maintaining a buy signal since September 8. If traders heed the signal and increase their exposure, an immediate rebound from the $3.00 support could ensue. A recovery from here would boost the chances of XRP testing resistance at $3.35 and the record high of $3.66.

The Ichimoku Cloud on the same daily chart holds below the XRP price, mirroring strong support and a bullish outlook. If XRP continues to hold above the Ichimoku Cloud, serving as a dynamic support, it suggests a bullish trend structure despite the current price drop. This means that XRP’s bullish potential is intact as the Cloud signals there is room for growth.

Cryptocurrency metrics FAQs

What is circulating supply?

The developer or creator of each cryptocurrency decides on the total number of tokens that can be minted or issued. Only a certain number of these assets can be minted by mining, staking or other mechanisms. This is defined by the algorithm of the underlying blockchain technology. On the other hand, circulating supply can also be decreased via actions such as burning tokens, or mistakenly sending assets to addresses of other incompatible blockchains.

What is market capitalization?

Market capitalization is the result of multiplying the circulating supply of a certain asset by the asset’s current market value.

What is trading volume?

Trading volume refers to the total number of tokens for a specific asset that has been transacted or exchanged between buyers and sellers within set trading hours, for example, 24 hours. It is used to gauge market sentiment, this metric combines all volumes on centralized exchanges and decentralized exchanges. Increasing trading volume often denotes the demand for a certain asset as more people are buying and selling the cryptocurrency.

What is the funding rate?

Funding rates are a concept designed to encourage traders to take positions and ensure perpetual contract prices match spot markets. It defines a mechanism by exchanges to ensure that future prices and index prices periodic payments regularly converge. When the funding rate is positive, the price of the perpetual contract is higher than the mark price. This means traders who are bullish and have opened long positions pay traders who are in short positions. On the other hand, a negative funding rate means perpetual prices are below the mark price, and hence traders with short positions pay traders who have opened long positions.