XRP Derivatives Show Liquidity Drain as Bearish Control Grows

The cryptocurrency market is witnessing a significant deterioration in XRP derivatives conditions, with Binance data showing Open Interest has collapsed from record highs above $1.7 billion to approximately $504 million, briefly touching $473 million. This dramatic contraction represents the lowest level since November 2024 and signals a major outflow of liquidity from both long and short positions. According to analysis from Arab Chain’s CryptoQuant report, this steep decline reflects that traders no longer possess the conviction needed to sustain a clear directional trend, creating a vacuum of market participation.

The liquidity drain aligns closely with XRP’s price drop to $2 after the cryptocurrency failed to maintain its position above the $2.50-$3 range in recent weeks. This correlation suggests that traders who were flushed out during the decline are not reopening positions, leaving the market driven by short-term flows rather than sustained accumulation. The absence of meaningful accumulation from whales or institutions further compounds the problem, creating an environment where selling pressure continues to outweigh buying demand without significant new capital entering the market.

Funding rates over the past two months have frequently turned negative, indicating that short sellers are willing to pay to maintain their positions—a clear signal of bearish market control. Negative funding typically occurs when selling pressure significantly outweighs buying demand, increasing the probability of continued downside unless fresh liquidity enters the market. This persistent negative funding environment, combined with the collapsing Open Interest, creates a feedback loop that reinforces the bearish sentiment across XRP derivatives markets.

The combination of these derivatives metrics paints a picture of deep market fragility. With both long and short traders reducing their exposure, the market lacks the speculative appetite and leverage that typically drives sustained price movements. The data from Binance, as the largest trading platform by volume, provides particularly significant insight into broader market sentiment, showing that even the most active traders are stepping back from XRP positions amid the current uncertainty and risk aversion affecting the broader crypto market.

XRP’s price action reflects the deteriorating derivatives conditions, with the cryptocurrency struggling to maintain key psychological levels. After failing to hold above the $2.50-$2.70 range, price broke down sharply and recently tagged lows near $1.90 before attempting a modest rebound. The rejection from both the 50-day and 100-day moving averages demonstrates that sellers remain firmly in control, with both moving averages now sloping downward—a technical indicator of sustained bearish momentum.

The technical picture shows XRP trading below the 200-day moving average, reinforcing the broader downside bias and signaling that the market has not yet regained long-term support. Volume patterns further confirm the bearish structure, with spikes during selloffs highlighting capitulation-driven moves rather than accumulation. The weaker volume on recent green candles suggests limited conviction behind any bounce attempts, with each recovery meeting resistance and forming lower highs and lower lows—a classic bearish continuation pattern.

To shift the current negative sentiment, XRP would need to reclaim the $2.40 level and consolidate above it; otherwise, the risk of retesting $1.90 or even falling toward $1.70 remains elevated. The current market structure, combined with the derivatives data showing liquidity drain and bearish control, suggests that without a significant reversal in market behavior, XRP remains vulnerable to further downside pressure as the broader crypto market continues to struggle with uncertainty and fading bullish momentum.