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Ripple’s price surpassed $0.66 on March 25, experiencing a 17% increase within the span of a week. Recent trends in the derivative market indicate that traders are eager for further upside.
Over the past week, Ripple (XRP) has been following the broader trend of the mega-cap crypto market, showing a positive trajectory.
For the first time in two weeks, XRP’s open interest has exceeded $1 billion.
On March 11, there was a surprise breakout for bulls as the XRP price surged by 18.5% in just 24 hours, reaching a peak of $0.74. However, a rapid wave of profit-taking resulted in a correction below $0.60 within a week.
After a week of consolidation, recent trends in the derivative markets suggest that bullish XRP traders are preparing for another significant price increase.
CoinGlass’s open interest chart provides real-time information on the total value of active futures contracts for a specific cryptocurrency. It is used as a measure of the market’s depth, liquidity, and overall investor interest in the underlying asset.
On March 26, XRP’s open interest reached $1.02 billion, the highest since March 14. This also indicates a net capital inflow of $150 million since the significant market dip recorded on March 20.
An increase in open interest during a price recovery phase suggests that most traders are betting on the current upward trend to continue, leading to rapid capital inflows.
Between March 20 and March 26, XRP spot prices increased by 19.4%, while open interest only saw a 15% increase. This unique market alignment suggests that the current rally is primarily driven by organic spot demand rather than speculative trading in the futures market.
Bullish traders have doubled their leveraged positions to take advantage of the rally.
The fact that XRP’s price is outpacing the growth of open interest indicates that there are stronger fundamental factors driving the ongoing rally. These factors include increased adoption and positive ecosystem developments, such as the new automated market maker (AMM) functionality on the Ripple-backed blockchain network.
On March 22, Ripple’s Chief Technology Officer David Schwartz praised the long-awaited launch of the AMM functionality, considering it a significant evolution of the platform’s native decentralized exchange.
Speculative traders in the derivative markets have increased their appetite for high-risk leveraged positions this week.
CoinGlass’s funding rate metric represents the percentage of fees paid between long traders and short position holders in the derivative markets.
Between March 23 and March 26, XRP’s funding rate increased from 0.01% to 0.02%, indicating that bullish traders have more than doubled their leveraged positions in the past 72 hours.
An increase in funding rate typically signifies widespread risk-taking and an expectation of further upside. This means that long traders are paying higher fees to short traders to keep their perpetual future positions open, anticipating larger profits when spot prices rise.
When short traders observe a rapid increase in leverage and aggressive risk-taking among long traders, they often make spot purchases to hedge their bets and mitigate potential losses if the rally surpasses their margin-call price.
The hedging purchases by short traders could contribute to the growing market demand and further accelerate the price rally in the coming days.
Taking into account the 100% increase in bullish traders’ leverage activity, the organic growth in spot demand, and the potential hedging strategies from short traders, it appears that XRP’s price is poised for another upward movement above $0.75.
The current trend of the relative strength index (RSI) technical indicator, which stands at 53.2, also supports this bullish XRP price forecast. It indicates that despite the 17% price gains in the past week, there is still significant room for growth before XRP markets enter overbought territories.
Therefore, if XRP can break above the next significant resistance level at $0.70, as indicated by the upper Bollinger band, a major breakout towards $0.75 could be on the horizon.
However, in a bearish market downturn, it will be crucial to monitor the support level at $0.57, depicted by the lower limit of the Bollinger band indicators. A significant downward swing below this range could result in the bears regaining control of the market momentum.