XRP’s Low Funding Rate Doesn’t Attract Bullish Investors: What’s Behind This?

Key takeaways:

• XRP derivatives show a bearish trend as the funding rate plunged significantly negative, while open interest remains unchanged.

• XRP ETF trading volumes and decreasing XRP Ledger TVL indicate waning interest in the XRP ecosystem, lowering the likelihood of a short-term price recovery.

XRP (XRP) dropped 9% over two days after being turned away at $2.18 on Tuesday. The decline below $2 caused temporary upheaval in derivatives markets as the cost of maintaining leveraged bearish positions surged to a two-month high. Traders are concerned that XRP might weaken further due to a slowdown in exchange-traded fund (ETF) activities and a decline in XRP Ledger deposits.

The funding rate for XRP perpetual futures dropped to -20% on Thursday, marking the lowest point since the Oct. 10 crash. Negative values suggest that sellers (shorts) are compensating buyers (longs) to keep positions open, indicating a substantial lack of demand from bullish traders. Under normal circumstances, this rate typically fluctuates between 6% and 12% to cover the cost of capital, with longs paying that expense.

Such exceedingly negative funding rates are uncommon and typically short-lived. Some analysts interpret these as potential reversal signals, although most historical instances occurred during flash crashes rather than prolonged corrective phases. Additionally, the dwindling appetite for leverage has led many to speculate whether traders have simply distanced themselves from XRP.

As of Thursday, aggregate open interest in XRP futures remained at $2.8 billion, unchanged from the previous week. Still, leveraged positions have not returned to the $3.2 billion level observed in late November. The data indicates that XRP bears are hesitant to amplify their exposure, particularly after the token has already experienced a 45% decline since hitting $3.66 in July.

Declining XRP ETF activity and fading TVL on XRP Ledger

The subdued enthusiasm for bullish XRP positions can be attributed to diminishing activity in US-listed XRP ETFs. Traders entered November with robust expectations, but inflows and trading activity sharply declined after only three weeks, leaving assets under management stuck around $3.1 billion, as per CoinShares data. For context, Solana ETFs manage $3.3 billion in assets.

Daily volume for US-listed XRP ETFs seldom surpasses $30 million, significantly dampening interest from institutional investors. Additionally, declining demand for the XRP Ledger poses further challenges for holders. Even the Ripple-backed stablecoin Ripple USD (RLUSD) largely relies on the Ethereum network instead of XRP’s infrastructure.

Over $1 billion worth of RLUSD has been issued on Ethereum, compared to merely $235 million on the XRP Ledger. More troubling is that TVL on the XRP Ledger has plummeted to its lowest point of 2025 at $68 million, indicating diminishing engagement with the chain’s decentralized applications (DApps). In contrast, the Stellar blockchain maintains $176 million in TVL, even though XLM’s market cap is 93% lower 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 pressure as rival blockchains like BNB Chain and Solana strengthen their foothold in the DApps ecosystem. The restricted activity on the XRP Ledger creates a self-reinforcing cycle, resulting in fewer incentives for investors to hold XRP, especially when juxtaposed with the native staking yields available on BNB and SOL. 

Currently, there is no definitive evidence that any uptick in XRP Ledger activity would result in direct benefits for XRP holders. 

XRP derivatives indicate rising bearish confidence, while on-chain metrics and ETF flows reflect waning interest, particularly from institutional investors. Consequently, the likelihood of sustained bullish momentum for XRP appears low in the near term.

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