XRP Spot Buying Rises as Bearish Sentiment Hits Extremes, CryptoQuant Flags Reversal Signal

$XRP saw a sharp rise in spot trading on Binance between July 4 and July 8, even as activity in the derivatives market continued to decline.

Market watcher CryptoOnchain on CryptoQuant said capital is moving into the spot market while leveraged positions continue to unwind. Similar setups have historically preceded funding-rate resets.

Binance Spot Activity Rises While Leverage Shrinks

CryptoOnchain noted that Binance recorded a spike in $XRP spot activity during the period. On July 7 alone, inflows reached 64.9 million $XRP, compared with 49.2 million $XRP in outflows.

However, the surge in spot trading did not reverse the ongoing decline in derivatives activity. Binance $XRP Open Interest had already fallen from more than $500 million in mid-June to $431 million by July 4. It later dropped further to $399 million by July 10.

Meanwhile, long liquidations jumped 94% from the previous week and were 172% above the three-month average. Short liquidations, by contrast, fell 53%.

Funding Rates Rise Despite Lower Open Interest

Although Open Interest continued to fall, Binance funding rates recovered after briefly turning negative in late June. Funding rates rose 266% week over week to 0.007.

According to CryptoOnchain, rising funding rates, falling Open Interest, and massive long liquidations suggest that traders opening new long positions are paying higher premiums even as overall leverage declines.

On-Chain Activity Shows Signs of Recovery

The report said $XRP’s on-chain data looks more stable than its derivatives market. Active addresses remain 11% below the three-month average, showing network activity has yet to fully recover.

However, transaction volume increased by about 3% to 4% over the past week and month, although it is still 21% below the three-month average. The Network Value to Transactions (NVT) ratio has also declined, which may indicate network usage is stabilizing.

Funding-Rate Reset May Be Next

CryptoOnchain said the current market structure, marked by rising funding rates, falling Open Interest, and heavy long liquidations, has often led to funding-rate resets in the past. Whether that happens again will depend on how traders react to the gap between stronger funding rates and weaker leveraged participation.

CryptoQuant Flags Possible Reversal Signal

Separately, CryptoQuant analyst Darkfost noted that $XRP’s derivatives market has reached extreme bearish levels after its sharp decline, with Binance funding rates turning deeply negative. He said excessive short positioning could act as a contrarian signal, similar to conditions seen in April 2025 before $XRP’s price rallied 126%.

While past patterns do not guarantee future results, Darkfost said the combination of a major correction and extreme bearish sentiment could increase the odds of a medium-term recovery.