XRP Price Declines as Derivatives Market Signals Bearish Sentiment
At the time of writing on February 6th, the price of Ripple (XRP) is just above the $0.50 level. However, recent trends in the derivatives market are indicating potential bearish signals.
XRP has faced a series of bearish news events in recent weeks, resulting in a 6% decline within the seven-day timeframe. One notable event was the hack on January 31st, where Ripple Labs’ co-founder Chris Larsen lost $120 million. Although exchanges and law enforcement agencies have intervened since then, investors’ reaction to the hack has further favored the bears, causing the price to decline from $0.54 to $0.50.
In the derivatives market, CoinGlass’s open interest data reveals that while the price has decreased by 6%, open interest has actually increased by $66 million in the last 10 days. This suggests that short traders are strengthening their positions, indicating a reinforcement of bearish sentiment.
The long-to-short ratio, which tracks the ratio of long positions to short positions in the market, also supports the bearish outlook. XRP’s long-to-short ratio has been below 0.99 for the majority of the last 30 trading days, indicating the dominance of the bears. Currently, 50.7% of active XRP futures contracts are short positions, while 49.3% are long positions.
The negative divergence between price and open interest, combined with the low long-to-short ratio, could potentially lead to further downsizing. If historical observations hold true, investors should anticipate a downward movement below $0.50 in the coming days.
Additionally, the Parabolic SAR technical indicator also supports the bearish price forecast. The indicator currently points to $0.55, while the current price is $0.50, indicating a dominant bearish momentum. Traders often interpret this as a signal to sell or enter more short positions, suggesting that the price trend may continue to decline.
If this scenario unfolds as predicted, significant support could be found at the psychological level of $0.45 to prevent widespread margin call triggers. However, if the $0.45 support is not held, the price could further decline towards $0.40. On the other hand, the bulls could invalidate this bearish forecast by pushing the price back up towards $0.55. However, the resistance at $0.54 could pose a challenge.
Overall, the current trends in the derivatives market and technical indicators point to a potential bearish reversal for Ripple (XRP) below the critical $0.50 support level.
