XRP rises above $1.60 amid mixed market signals
|- XRP consolidates around $1.60 on Wednesday as weak sentiment caps upside potential.
- XRP ETF inflows resume after a brief pause, signaling renewed institutional interest.
- The XRP derivatives market remains weak as traders close positions, driving futures open interest down to $2.61 billion.
Ripple (XRP) hovers around the $1.60 pivotal level at the time of writing on Wednesday, reflecting stable but weak sentiment across the crypto market. Intense volatility triggered a brief sell-off on Tuesday, driving the remittance token to pick up liquidity at $1.53 before recovering to the current level.
Inflows into spot Exchange-Traded Funds (ETFs) signal institutional interest. However, a weak derivatives market suggests that XRP may lack the required buying pressure to sustain recovery in the short to medium term.
XRP wobbles as retail escapes volatility
The XRP derivatives market weakens further as futures Open Interest (OI) drops to $2.61 billion on Wednesday from $2.93 billion the previous day. CoinGlass data shows that OI, which tracks the notional value of standing futures contracts, has continued to trend lower from $4.55 billion on January 6 and $8.36 billion on October 10, pointing to a sustained decline in retail interest in the token.
A persistent decline in OI adds to selling pressure, as traders increasingly close positions rather than open new ones. Conversely, OI expansion would support a bullish outlook in XRP amid improving market sentiment.
OI surged to a record $10.94 billion on July 22 after XRP hit a new all-time high at $3.66 on July 18, emphasising the need for steady retail interest.
US-listed XRP spot ETFs mirrored the volatility in the crypto market, attracting approximately $19 million in inflows on Tuesday after mild outflows of $405,000 on Monday. The resurgence points to renewed institutional interest, bringing the cumulative inflow to $1.2 billion and net assets under management to $1.11 billion.
Extending the inflow streak in the coming days could improve risk-on sentiment and increase the odds of XRP rising above key supply zones at $1.65 and $1.77.
Technical outlook: XRP outlook hinges on key indicators
XRP exhibits subtle recovery signals as the Relative Strength Index (RSI) rises to 30, slightly above the oversold region, on the daily chart. A further increase in the RSI toward the midline would indicate that bearish momentum is easing and pave the way for a steady rebound.
Short-term targets include $1.66, tested on Monday, and $1.77, which was tested as support on December 19.
Still, XRP is not out of the woods yet, especially with the Moving Average Convergence Divergence (MACD) indicator extending its decline below the signal line on the same chart. Despite the histogram bars contracting, they remain below the zero line, a picture that may prompt investors to reduce risk exposure.
Closing below the pivotal $1.60 level may accelerate the downtrend to test Tuesday’s low at $1.53 and Saturday’s support at $1.50.
Open Interest, funding rate FAQs
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.
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.
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