Derivatives Market for XRP Is Sending Some Signals About the Price

On-chain analytics platform CryptoQuant reported that spot liquidity in the $XRP market is rapidly increasing, but the delegitimization process in derivatives trading, which has been ongoing since mid-June, has not yet ended.

According to CryptoQuant data, Binance experienced a significant increase in $XRP spot trading activity between July 4th and 8th. Specifically, on July 7th, 64.9 million $XRP were injected into the exchange, while 49.2 million $XRP were withdrawn on the same day.

The analysis added that this volatility in the spot market was not the factor that triggered the closing of positions in derivative markets. It was noted that the size of open $XRP positions on Binance decreased from over $500 million in mid-June to $431 million by July 4th, and further to $399 million by July 10th.

During the same period, long position liquidations increased by 94 percent on a weekly basis. While long position liquidations were reported to be 172 percent above the average of the last three months, short position liquidations decreased by 53 percent.

CryptoQuant stated that the high inflows and outflows in the spot market indicate investors repositioning their capital rather than anticipating a new and strong direction. The continued decline in open positions suggests that leveraged capital continues to exit the $XRP derivatives market.

In contrast, a different trend was observed in funding rates. Binance $XRP funding rate, which briefly turned negative at the end of June, increased by 266 percent on a weekly basis, rising to 0.007.

According to CryptoQuant, as open positions decline while funding rates rise and long position liquidations increase, it indicates that remaining or newly opened long positions in the market are paying increasingly higher premiums. This suggests that despite a decrease in the total derivatives market capitalization, a segment of investors still maintains a bullish outlook.

On-chain data, however, presents a more balanced picture compared to the derivatives market. The number of active addresses on the $XRP network remains 11 percent below the average of the last three months, indicating that broad-based network participation has not yet fully recovered.

However, the number of transactions increased by approximately 3-4 percent on both a weekly and monthly basis. Nevertheless, the total number of transactions remains 21 percent below the three-month average.

During the same period, a decline in the NVT ratio, which measures the relationship between $XRP’s network value and transaction volume, suggested that the previous decline in network usage may have slowed and usage may have begun to stabilize.

CryptoQuant stated that the market becomes more vulnerable to funding rate corrections during periods when long position liquidations continue, funding rates rise, and the derivatives market size shrinks.

If this trend continues, funding rates may fall again as overly optimistic leveraged positions are liquidated. However, strengthening spot demand and a continued recovery in network activity could limit the impact of any potential correction.

*This is not investment advice.