Massive Liquidations Amplify XRP’s Decline
One of the key drivers behind XRP’s drop is a wave of long position liquidations in the derivatives market. According to CoinGlass data, XRP futures saw $12.92 million in long positions liquidated over the past 24 hours, compared to just $3.86 million in short liquidations.
Liquidations force bullish traders to sell their positions, creating additional downward pressure on the asset’s price. This dynamic mirrors a similar event in December when $72.6 million in long liquidations caused XRP to drop 23% to a low of $1.95.
XRP/USD daily chart. Source: TradingView
Additionally, XRP’s funding rates, which measure demand for long positions, have shifted from 0.21% per week on Jan. 7 to -0.11% per week on Jan. 8. The negative funding rate indicates growing interest in short positions, with open interest in XRP contracts shrinking by $300 million over the past day.
Long-Term Holders Add to Selling Pressure
Another factor weighing on XRP’s price is the offloading of tokens by long-term holders. Data from Santiment’s Dormant Circulation Supply indicator shows a sharp increase in the movement of XRP tokens that had been idle for over a year.
Between Jan. 4 and Jan. 7, the dormant circulation supply surged from 8.3 million to 208.3 million XRP, equivalent to over $467 million worth of tokens entering the market. This influx of supply has contributed to the 7.2% drop in XRP’s price since Jan. 4, undermining bullish momentum.
Key Technical Levels at Risk
XRP’s latest price action reflects a correction that began on Dec. 3, when its relative strength index (RSI) entered overbought territory as the price approached $2.90. The altcoin is currently testing resistance at the upper boundary of a descending parallel channel at $2.45.
Total crypto liquidations. Source: CoinGlass
If bulls fail to reclaim $2.45 as support, XRP risks further declines. The next key support level lies at $2.15, aligned with the 50-day simple moving average (SMA). A break below this level could trigger increased selling activity, pushing the price towards the channel’s lower boundary at $2.00.
Despite today’s drop, analysts remain cautiously optimistic. Some, including crypto strategist Steph Is Crypto, believe XRP could eventually break out of its current consolidation phase and reach new highs, with a potential price target of $5.60.
For now, XRP’s price outlook hinges on holding above key support levels and overcoming resistance at $2.45. Until then, the cryptocurrency remains vulnerable to further bearish pressure in an uncertain market environment.
