Rather than passively waiting for unexpected events to eat into their profits, investors are on high alert. Despite this cautious stance, there is significant buying pressure in Ripple’s [XRP] spot market, indicating that the current situation could present a valuable “buying the dip” opportunity.
Nevertheless, futures traders have a differing opinion, using the current cautious environment to engage in short-selling activities targeting XRP. The question remains: which side will ultimately prevail after the risk reduction settles?
Traders or Buyers?
Over the span of ten days, approximately $1.7 billion in futures positions have been closed. XRP’s Estimated Leverage Ratio (ELR) has been on a downward trend since reaching its peak of $3.20, as traders opt for reduced leverage.
The trend of risk reduction is evidently gaining momentum. As monthly inflation sees a 0.2% increase, growing uncertainty is prompting investors to mitigate risks in anticipation of a potential Federal Reserve shock.
The ongoing sell-off in the futures market mirrors XRP’s current consolidating phase. While large whale holdings are helping to prevent a significant decline, volatility is increasing, with sell orders dominating perpetual trades.
Notably, within the past 12 hours, two substantial liquidity pools on Binance, amounting to over $3 million in leverage, were liquidated, resulting in a short squeeze and propelling XRP back into positive territory.
The critical query now arises: can this upward momentum be sustained? For the rally to persist, there must be a noticeable imbalance in the supply-demand dynamics.
While futures traders exhibit some reluctance, the pivotal factor lies in whether the spot exchange can effectively absorb the liquidity.
XRP: Emphasizing Fundamentals Over Speculation?
The XRP/USDT pair on Binance is experiencing a surge in buy orders, fueling a three-day recovery for the altcoin, with a modest 1% gain within a single day.
Traders appear to view the ongoing risk reduction as an opportunity to “buy the dip.” Nonetheless, despite this sentiment, the volume of buy orders has notably decreased – dropping by half from $600 million just three days prior.
While the buying pressure is counteracting the liquidity surge from the perpetual market, a lack of increased volume may pave the way for sellers to take charge.
With futures traders reducing leverage, XRP’s price is now less susceptible to sudden fluctuations or prolonged downward pressure. The focus is now squarely on the fundamentals to maintain stability amid evolving market conditions.