Why XRP could extend its correction?

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At the time of writing on Tuesday, Ripple (XRP) has fallen below the daily opening low of $1.48 as headwinds remain in the crypto market. A short-term support is emerging at $1.45, but the creation of a bearish scenario could further weaken the derivatives market and prolong the correction.

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XRP mixed outlook as retail demand weakens

XRP is struggling to maintain its recovery, causing price fluctuations due to a decline in retail interest. After XRP futures open interest (OI) surged to $2.56 billion on Monday, it dropped to $2.53 billion on Tuesday, dampening last week’s optimism, which sent the price to $1.67 on Sunday.

OI remains well below the record high of $10.94 billion in July. As OI decreases, traders close positions in large numbers and refuse to open new positions, making XRP vulnerable to market pressure and risk-off sentiment.

CoinGlass data shows that traders are increasingly accumulating short positions, indicating a lack of conviction in XRP’s short-term bullish outlook. The OI-weighted funding rate remained at -0.0078% on Tuesday, remaining in negative territory since Sunday. Without follow-through momentum, price will continue to fluctuate amid an overall bearish trend.

XRP OI-Weighted Funding Rate | Source: CoinGlass

Technical Outlook: Evaluating XRP Market Structure

XRP is hovering above $1.45, while the 50-day exponential moving average (EMA) is well below $1.72, 100-day EMA at $1.93, and 200-day EMA at $2.13. All three moving averages are turning down, which confirms the deteriorating technical structure and raises the possibility of prolonging the ongoing correction.

Meanwhile, the Relative Strength Index (RSI) at 40.76 remains below the midline on the daily chart, despite a recent change in momentum when the Moving Average Convergence Divergence (MACD) moved above its signal line on the same chart. The extended green histogram bars could prompt traders to increase their exposure, especially if XRP defends the short-term support at $1.45 tested on Monday.

The falling trend line from $3.66 (record high) will limit gains, with resistance seen near $2.10. Furthermore, the Parabolic SAR indicator is below the $1.21 price, providing initial support, which if lost could lead to bearish orders. On the other hand, an improvement in MACD momentum will help propel a move towards Sunday’s high of $1.67.