Key takeaways:
XRP derivatives are heavily influenced by bears as the funding rate declines significantly and open interest stays flat.
XRP ETF volumes and diminishing XRP Ledger TVL indicate waning interest in the XRP ecosystem, lowering the chances of a short-term price recovery.
XRP (XRP) dropped 9% over two days following a rejection at $2.18 on Tuesday. The fall below $2 caused temporary disturbances in derivatives markets as the cost of holding leveraged bearish positions escalated to a two-month high. Traders are concerned that XRP may weaken further due to slowing exchange-traded fund (ETF) activities and a reduction in XRP Ledger deposits.
The funding rate on XRP perpetual futures dropped to -20% on Thursday, marking the lowest since the crash on Oct. 10. Negative rates suggest that sellers (shorts) pay buyers (longs) to keep open positions, indicating a stark absence of demand from bullish traders. In more balanced scenarios, the rate typically varies from 6% to 12% to cover capital costs, which longs would usually pay.
Such extreme negative funding rates are uncommon and generally short-lived. Some analysts interpret them as potential reversal indicators, although most historical instances occurred during market flash crashes rather than prolonged corrective phases. Furthermore, the declining appetite for leverage has led some to speculate that traders may be pulling back from XRP.
As of Thursday, aggregate open interest in XRP futures remained at $2.8 billion, unchanged from the previous week. Nonetheless, leveraged positions have not returned to the $3.2 billion level seen in late November. This data implies that XRP bears are hesitant to increase their exposure, especially after a 45% drop since the $3.66 peak in July.
Declining XRP ETF activity and fading TVL on XRP Ledger
The subdued demand for bullish XRP positions correlates with the dwindling activity in US-listed XRP ETFs. Traders began November with high expectations, but inflows and trading activities plummeted sharply after three weeks, leaving assets under management stagnating near $3.1 billion, according to CoinShares data. In contrast, Solana ETFs hold $3.3 billion in assets.
Daily trading volumes for US-listed XRP ETFs seldom exceed $30 million, significantly dampening appeal from institutional desks. The waning demand for the XRP Ledger further frustrates holders. Even the Ripple-backed stablecoin Ripple USD (RLUSD) primarily utilizes the Ethereum network rather than XRP’s infrastructure.
Over $1 billion worth of RLUSD has been issued on Ethereum, compared to only $235 million on the XRP Ledger. Additionally, the TVL on the XRP Ledger has plummeted to its lowest level of 2025 at $68 million, indicating decreased interaction with the chain’s decentralized applications (DApps). In contrast, the Stellar blockchain boasts $176 million in TVL, even though XLM’s market cap is 93% smaller than XRP’s $121.8 billion.
Related: XRP price may grow ‘from $2 to $10’ in less than a year–Analyst
XRP continues to face challenges as competing blockchains like BNB Chain and Solana enhance their footholds in the DApps ecosystem. The limited activity on XRP Ledger fosters a cycle where investors have diminishing reasons to hold XRP, especially compared to the attractive staking yields available on BNB and SOL.
Currently, there is no definitive evidence that any increase in XRP Ledger activity would provide direct advantages for XRP holders.
XRP derivatives suggest heightened confidence among bears, while on-chain metrics and ETF flows reveal dwindling interest, particularly from institutional investors. Consequently, the prospects of sustained bullish momentum for XRP appear minimal in the near future.
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