Data shows the XRP Open Interest rose alongside Funding Rates turning red, a sign that traders opened new short positions related to the coin.
XRP Has Witnessed A Surge In Open Interest Recently
As pointed out by CryptoQuant community analyst Maartunn in a Sunday X post, the XRP Open Interest witnessed a sharp surge. The “Open Interest” here refers to an indicator that measures the total amount of positions related to the cryptocurrency that are currently open on all centralized exchanges. The metric includes both short and long positions.
As the chart shared by Maartunn shows, the XRP Open Interest climbed to $943 million during the weekend.
The Funding Rates were red alongside this Open Interest jump | Source: @JA_Maartun on X
The increase in the indicator naturally implies a jump in speculative activity among derivatives market traders tok place. Now, what kind of bets were traders opening? The answer to that can be inferred from the Funding Rate, which tracks the amount of periodic fees that derivatives contract holders are paying each other.
From the chart, it’s visible that the Funding Rate remained negative during the Open Interest surge, suggesting short investors were paying a premium to the long ones. In other words, the new positions that appeared leaned in the bearish direction.
Generally, a sharp rise in the Open Interest can lead into market volatility, as the risk of mass liquidations occurring can go up. The side that’s more likely to be caught up in such a squeeze tends to be the one that’s more dominant. Since the new Open Interest increase came alongside a red Funding Rate, a short squeeze became more probable to happen.
XRP has observed a bounce over the past day, so it’s possible that short liquidations had a role in it. As the analyst has highlighted in a new post, however, the Open Interest has still remained at high levels even after the rebound.
The latest data for the XRP Open Interest | Source: @JA_Maartun on X
Currently, the XRP Open Interest is sitting at $952 million, higher than it was on Sunday. Thus, it would appear that a further influx of speculative activity has occurred in the market. “Open Interest didn’t fully reset, and price is now tapping resistance,” noted Maartunn. “Not the kind of structure I want to overstay.”
XRP isn’t alone in finding a rebound in the past day; the rest of the cryptocurrency sector has also surged. Bitcoin, for example, has gone up by more than 4% over the last 24 hours.
Like with XRP, the rally has been accompanied by a spike in the Open Interest, a potential sign that leverage is driving the market right now. “These rallies are usually fragile. Around 75% tend to return to their origin,” explained the analyst.
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 one 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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