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XRP XRP flashes two contradictory signals: Which one should a Ripple trader trust?
This popular cross-border token has been in a difficult situation in the past few weeks (even months, and nearly a year), falling below the much-watched psychological level of the dollar at least twice for the first time in nearly two years. This naturally hit investor sentiment, but the two sets of data paint a particularly interesting picture, implying what might happen next.
Angry XRP trader
Data from Sanitation Intelligence shows that negative comments surrounding XRP have surged online over the past week as XRP failed to rebound from falling to $1 and below. In fact, public sentiment on the most popular social media platforms has fallen to a three-month low.
At the same time, XRP Ledger developer Bird pointed to another potentially worrying development: XRP's open interest volume is approaching levels seen during the famous liquidation event on October 10-when leveraged positions worth more than $19 billion were erased in less than a day.
Open interest represents the total value of open derivative positions. Normally, an increase in this number means traders are putting more capital and leverage into the market. This can be particularly dangerous if the underlying assets themselves are already quite unstable-which has not been the case recently, unlike the October 10 massacre.
However, Bird warned that if circumstances change, high open interest could lead to another sharp price volatility or even a larger liquidation. However, it is worth noting that high open interest does not determine the direction of price changes. Over-leveraged long positions can exacerbate declines, and vice versa.
Another warning sign came from CryptoQuant, where analysts pointed out that selling pressure on XRP in the currency has increased significantly in the past few weeks.
Positive indicators
While all the above signs suggest a major correction may occur, things are not that simple. For example, while traders are becoming increasingly pessimistic, activity on the underlying network is moving in the opposite direction. The same Sanitation report showed that XRP Ledger recorded nearly 50,000 active addresses in just 24 hours, setting a two-month high.
This is a major turning point from July's data, when activity fell to a nearly one-year low. A similar surge in online activity occurred in May, before XRP experienced a sharp rise, pushing the token to $1.55.
Although things are different now, the combination of rising online activity and extreme pessimism among XRP traders could quickly lead to sharp volatility, especially when we consider the soaring volume of open interest.
