The past few weeks (and months, and almost a year) haven’t been kind to the popular cross-border token, which dipped below the coveted psychological level of $1.00 at least twice for the first time in nearly two years.
Naturally, this has deteriorated investors’ sentiment, but two sets of data paint a particularly interesting picture of what might come next.
Nervous XRP Traders
Data provided by Santiment Intelligence indicated that the negative commentaries online surrounding XRP have skyrocketed in the past week as the asset failed to recover from its drop to and slightly below $1.00. In fact, crowd mood across the most popular social media platforms has reached its lowest level in three months.
Meanwhile, XRP Ledger developer Bird highlighted another potentially concerning development. XRP’s open interest is approaching levels seen around the infamous October 10 liquidation event in which over $19 billion worth of leveraged positions were wiped out in less than a day.
Open interest represents the total value of outstanding derivatives positions. In general, rising figures indicate traders are deploying more capital and leverage into the market. This could be particularly threatening if the underlying asset is already quite volatile, which hasn’t been the case lately, unlike the October 10 massacre.
However, Bird warned that if that changes, the elevated open interest could lead to another sharp price move and even more substantial liquidations. It’s worth noting, though, that high open interest doesn’t determine the direction of the move. Overleveraged longs can amplify a crash and vice versa.
Another warning shot came from CryptoQuant recently, as the analysts noted that the XRP selling pressure on Binance has risen significantly in the past few weeks.
The Good Indicators
Although all of the above hints at a major correction, the story is not that simple. For instance, while traders have become increasingly pessimistic, activity on the underlying network is moving in the opposite direction. The same Santiment report showed that the XRP Ledger had recorded almost 50,000 active addresses within a single 24-hour period, which marked a two-month high.
This was a significant turnaround from the July numbers, when activity slumped to near-year lows. A similar surge in the network activity in May preceded a major XRP rally that drove the token to $1.55 at the time.
Although the circumstances are different now, the combination of rising network activity and XRP traders turning highly pessimistic could lead to intense volatility soon, especially when we factor in the skyrocketing OI.
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