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$XRP Open Interest has soared to a 2-week peak amid an increase in overhead liquidity, leading to suggestions of a potential short squeeze.
The recent market-wide slump, which pushed $XRP below the long-standing $1.3 support, has led to an increase in the $XRP Open Interest (OI), as short positions dominate. Data suggests this situation often leads to an imminent short squeeze.
Key Points
- The $XRP Open Interest rose from $892 million to $951 million, hitting a two-week high as the price fell below $1.3.
- Funding rates stayed negative, reaching -0.0010, indicating that short traders dominated.
- Liquidation clusters above the current price totaled $3.055 billion, with a major cluster of $318.57 million at $1.356.
- This situation often leads to a short squeeze if prices rise above levels dominated by short liquidation clusters.
$XRP Open Interest Rises While Price Falls
CryptoQuant analyst Maartunn called attention to this situation. He noticed a rise in short positions, along with increasing Open Interest and negative funding rates. Based on these signals, he suggested that the market could be setting up for a short squeeze.
Notably, data from Coinalyze confirms this trend. After $XRP dropped below the $1.31 support level early on April 5, the price continued falling and reached $1.26 by 12 noon, marking a 3% decline from that support level.
During the same period, $XRP’s Open Interest moved higher instead of falling alongside the price. Specifically, it spiked from $892 million to $951 million, representing the highest level in over two weeks. This shows that traders were opening new positions as the price dropped.
At the same time, the funding rate kept falling and stayed negative over a 24-hour period, reaching -0.0010 when Maartunn shared his analysis. A negative funding rate means short traders were in control, paying long traders to keep their positions open. These signals show that many traders were actively placing short bets during the price drop.
Bearish Sentiment Easing
The continued negative funding rate confirmed that the market had turned strongly bearish. Notably, traders were not only closing long positions but were adding more short positions, which increased the pressure on the price.
However, things began to change slightly as the price started to recover. After $XRP’s price bounced from $1.26, the rise in Open Interest slowed down. It dropped slightly to $943 million, while the price moved around $1.29 at the time Maartunn shared his findings.
As the recovery continued, $XRP moved up to $1.34, while Open Interest fell again to $942.9 million. This suggests that some of the positions opened earlier, likely short positions, were being closed or forced out, as bearish pressure started to weaken, even though the overall mood in the market has not fully turned positive.
Over $3 Billion in Liquidity Sits Above Price
Elsewhere, the liquidation heatmap provided by Coinglass for the Binance $XRP/USDT pair shows a large number of liquidation levels sitting above the current price.
Between $1.351 and $1.386, the market currently witnesses about $3.055 billion in leveraged positions. Within this range, one major cluster of $318.57 million sits at $1.356, just 1.19% above the current price of $1.34.
These levels often act like magnets for price movement. Markets tend to move toward areas where large liquidations can happen. If $XRP moves into this range, forced buying from liquidated short positions could push the price up quickly, creating a short squeeze.
Where Next for $XRP?
Even though sentiment still looks bearish, the current situation suggests a possible move higher in the short term. This kind of setup often leads to upward moves as a result of market positioning.
If $XRP continues to rise and enters the $1.35 to $1.38 range, it could trigger more liquidations and push the price higher. However, if the price fails to reach that range and drops again while funding rates stay negative, it would suggest that sellers still control the market and that the recent bounce may only be temporary.