Is XRP shorting activity expected to fuel an explosive rally
Amidst the recent turmoil and sell-offs in the cryptocurrency market, XRP Ledger (XRP), supported by Ripple Labs, is striving to regain its bullish momentum. Santiment, an on-chain analytics platform, has pointed out a factor that could contribute to further price increases for XRP. Despite the recent decline in the crypto market, heavy shorting activity against XRP could paradoxically serve as “rocket fuel” for a price rise.
Santiment has revealed that XRP, along with Cardano (ADA), is among the most heavily shorted altcoins following their relief bounces. This heavy shorting is seen as a positive sign for patient bulls, as the liquidation of these short positions could provide the necessary momentum for XRP to rise higher.
Current market indicators show that the Binance Funding Rate for XRP indicates a bearish market sentiment with a prevalence of short positions. The long/short ratio also leans slightly towards more short positions, reinforcing the bearish outlook. Additionally, strong support zones are identified between $0.48 and $0.50, while resistance is noted near $0.52. Movements beyond these points could trigger significant liquidations.
Recent data from CryptoQuant highlights a significant increase in Open Interest (OI) for XRP, indicating that more investors are opening positions with the expectation of price increases. This rise in open interest typically leads to higher liquidity and benefits traders by providing tighter bid-ask spreads and reducing slippage.
Santiment’s data shows that XRP’s 30-day MVRV is at -3.5%, suggesting a mildly bullish sentiment. This negative MVRV indicates that investors are, on average, holding losses, which can be a precursor to price recovery. Market analysts are optimistic, with one analyst predicting a correlation between XRP’s price and altcoin dominance, suggesting a potential rebound to $2.71.
Currently, XRP is trading at $0.49, with a slight decrease over the past 24 hours. However, the significant shorting activity and high liquidation leverage create a scenario where a short squeeze could lead to an explosive price rally. It is crucial for traders to monitor key support and resistance levels.
In conclusion, any positive news or shifts in market sentiment could lead to a short squeeze and an explosive price rally for XRP.
