The data shows that funding rates have also turned red as XRP open interest has increased, a sign that traders have opened new short positions related to the coin.
XRP has seen a surge in open interest recently
As CryptoQuant community analyst Martunn noted in a Sunday X post, XRP saw a sharp surge in open interest. “Open Interest” here refers to an indicator that measures the total volume of cryptocurrency-related positions that are currently open on all centralized exchanges. The metric covers both short and long positions.
As the chart shared by Martunn shows, XRP open interest climbed to $943 million over the weekend.
The Funding Rates were red alongside this Open Interest jump | Source: @JA_Maartun on X
The increase in the indicator naturally indicates a surge in speculative activity among derivatives market traders. Now, what types of bets were traders opening? The answer can be determined by the funding rate, which tracks the amount of periodic fees that derivatives contract holders pay to each other.
From the chart, it is visible that the funding rate remained negative during the open interest surge, which shows that short investors were paying a premium to long investors. In other words, the new situation that emerged was inclined towards recession.
In general, a sharp increase in open interest can lead to market volatility, as the risk of mass liquidations may increase. The side which is more likely to succumb to such pressure is the more dominant side. Since the new open interest increase came with the funding rate in the red, a short contraction became more likely.
XRP has seen a surge in the past few days, so it’s possible that short liquidations are at play. As the analyst noted in a new post, however, open interest still remains at a high level despite the rebound.
The latest data for the XRP Open Interest | Source: @JA_Maartun on X
Currently, XRP open interest stands at $952 million, which is higher than on Sunday. Thus, it appears that there has been another influx of speculative activity in the market. “Open interest has not fully reset, and the price is now exploiting resistance,” Martun said. “This is not the kind of structure I want to stay on.”
XRP is not alone in experiencing a rebound as of late; The rest of the cryptocurrency sector has also boomed. For example, Bitcoin is up more than 4% in the last 24 hours.
Like XRP, open interest has increased along with the rally, which is a potential sign that leverage is driving the market right now. “These rallies are usually fragile. About 75% return to their original positions,” the analyst said.
How the 24-hour percentage change in the metric has fluctuated for Bitcoin | Source: @JA_Maartun on X
xrp price
At the time of writing, XRP is floating around $1.35, unchanged from a week ago.
Looks like the price of the coin has climbed during the past day | Source: XRPUSDT on TradingView
Featured image from Dall-E, chart from tradingview.com
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