XRP big dump 16% approaching 2 dollars! Unclosed contracts create a low Bear Market?

XRP has fallen 16% in a week, approaching the $2 mark. The 24-hour volume surged by 27%, accounting for about 5% of its circulating market capitalization, indicating that selling pressure is rapidly increasing. Despite the U.S. launching an XRP ETF, XRP has still been unable to stop loss due to the overall slump in the crypto market. The open interest in XRP futures has dropped to its lowest level since November of last year, with extreme cases potentially testing $1.47.

The number of open contracts reaching a 5-month low signals disaster

(Source: Coinglass)

The open interest of XRP futures has dropped to its lowest level since November last year, when Trump's election momentum briefly boosted the crypto market sentiment. Open interest refers to the total value of all unsettled futures contracts, and the sharp decline in this indicator reflects a significant decrease in market participation, with investor confidence collapsing.

The decline of open contracts can be interpreted from two perspectives. The first is active exit, where traders no longer have confidence in the short-term prospects of XRP and choose to close their positions and wait. The second is passive liquidation, where highly leveraged bulls are forced to close their positions when prices fall. Looking at the recent price trend of XRP, the dramatic fluctuation of a 16% drop within a week has inevitably triggered a large number of stop loss orders and forced liquidations, and this cascading effect has further intensified the dumping pressure.

What is even more concerning is that the decline in open interest occurred against the backdrop of the recent launch of the XRP ETF. Typically, the launch of an ETF attracts new capital inflows, driving an increase in open interest and volume. However, in the case of XRP, the situation is exactly the opposite; this divergence suggests that the launch of the ETF has not boosted market confidence as expected, and may instead become a “sell the news” event. When the market reacts to positive news with a decline rather than an increase, it often marks the beginning of a trend reversal.

Historically, a significant decrease in open contracts usually signals one of two possibilities: either the market is about to bottom out (as panic sentiment has been released in advance), or an accelerated decline is imminent (due to a lack of new buying support). The current situation of XRP is closer to the latter, as the price has not yet entered a clearly oversold area, and the technical support levels are also precarious.

The 24-hour volume surged by 27%, highlighting the level of panic in the market. This volume accounts for about 5% of the circulating market capitalization of XRP, meaning that for every 20 XRP in circulation, 1 has changed hands in the past 24 hours. Such an abnormally high turnover rate typically occurs during periods of extreme panic or euphoria in the market, and the current price trend clearly indicates that this is a panic sell-off rather than a buying frenzy.

Fear and Greed Index falls to 15 as investors flee

The Fear and Greed Index has plummeted to 15, the lowest level since April, indicating that investor panic is intensifying. The Fear and Greed Index is a composite indicator that measures market sentiment, with values ranging from 0 to 100. A value of 0 represents extreme fear, 100 represents extreme greed, and 50 is neutral. The current reading of 15 signifies that the market has plunged deep into the fear zone, with investors selling off risk assets in search of safe havens.

Historically, a fear and greed index dropping below 20 often marks extreme pessimism in market sentiment, a situation that typically occurs during significant corrections or the early stages of a bear market in cryptocurrency history. During the bear market of 2022, this index lingered between 10 and 25 for an extended period. Whether the current reading of 15 indicates a similar bear market cycle is the question that the market is most concerned about.

For contrarian investors, extreme fear is often seen as a buying opportunity, as the market has become overly pessimistic, and any positive news could trigger a rebound. However, this strategy carries a high risk before a clear trend reversal is evident. Currently, the technical indicators for XRP do not show any signs of a bottom; the RSI is close to the oversold zone but has not yet entered, and the MACD remains in a bearish structure. In this situation, prematurely bottom-fishing could face further capital losses.

Despite the launch of the new XRP Exchange-Traded Fund (ETF) in the United States, the XRP token remains affected by the overall sluggishness of the crypto market and has failed to implement effective stop loss measures. This is the most disappointing aspect of XRP's current predicament. The launch of the ETF was supposed to be a significant positive development, providing institutional investors with a compliant investment channel and attracting new capital inflow. However, the reality is that after the ETF launch, XRP has not risen but has instead fallen, indicating that the market's reaction to this catalyst is “buy the expectation, sell the fact.”

This phenomenon is not uncommon in the crypto market. Bitcoin ETF also experienced a brief pullback during its initial launch, but subsequently reached new highs driven by continuous inflow of institutional funds. Whether XRP ETF can replicate this path depends on the subsequent capital inflow situation and the overall market environment. The current issue is that the crypto market is in a phase of overall adjustment, and unfavorable macroeconomic factors have overshadowed the positive effects of the ETF launch.

Technical Analysis: The $2 Trendline is the Last Line of Defense

(Source: Trading View)

XRP rebounded yesterday at the key trend line support level, and it may be brewing a short-term recovery. However, the risk of a falling market remains very high, and if the support level fails, it could result in significant losses. From the daily chart perspective, XRP is currently testing an upward trend line that extends from the year's low point, which is currently near the 2 dollar mark.

Why is this trend line so critical? It represents the lower boundary support of XRP's upward trend over the past few months. Once it is effectively breached, it indicates that the upward structure is completely destroyed, and the market will enter a new falling cycle. From the volume distribution, there are a large number of historical transaction records around 2 dollars, where many investors' costs are concentrated in this range. If the price falls below this level, these holders may turn to sell, resulting in a stop loss cascade.

If XRP breaks below this trend line, the first major demand zone is located at $1.75, which means the price may fall 17% from the current level. $1.75 is a key low point from the previous adjustment and an important support level in the Fibonacci retracement. In technical analysis, previous lows often become the first target for subsequent adjustments, as there are typically a large number of limit buy orders at these levels.

If the decline is greater, the price may fall to the next “downward area,” close to $1.47, which means a drop of 30%, enough to make even aggressive buyers feel uneasy. $1.47 is a deeper support level, and if it reaches that level, market panic may rise again, triggering larger-scale dumping. From a psychological perspective, a 30% drop is an unbearable loss for holders, potentially triggering a capitulation sell-off from the last batch of steadfast holders.

XRP Downward Path and Key Support Levels

$2.00 (current): trend line support, last defense line, breaking confirms the start of a bear market

1.75 USD (-17%): First target level, previous low and Fibonacci support

1.47 USD (-30%): extreme target level, deep pullback zone, may trigger capitulation dumping

Due to the market still being shrouded in fear, trying to grasp the opportunity to buy at the bottom feels very risky, especially under the circumstance where market momentum remains unclear. The RSI is currently close to 40 and has not yet entered the oversold zone (typically defined as below 30), indicating that from a momentum perspective, the downward momentum has not fully released. The MACD indicator is still in a bearish crossover state, with the fast line below the slow line and continuing to decline, which is a typical signal for confirming a downward trend.

Has the bear market officially begun? Three scenario analyses

Does the current trend of XRP signify the official start of a bear market? This can be analyzed from three scenarios. The first scenario is a short-term adjustment. If the support at 2 dollars holds and a rebound with increased volume occurs, along with a rise in the fear and greed index, XRP may simply be undergoing a healthy correction, with a chance to return to an upward channel in the future. The probability of this scenario is relatively low, as there is currently a lack of obvious reversal catalysts.

The second scenario is a continuation of the falling situation. If the $2 support fails, XRP will technically analyze and explore down to $1.75 or even $1.47. In this scenario, the bear market has already begun but has not yet entered the most panic stage. Investors need to wait for signs of overselling and the characteristics of volume exhaustion to consider bottom fishing. This is currently the most likely development path.

The third scenario is a systemic collapse situation. If the entire crypto market enters a bear market, with Bitcoin and Ethereum experiencing significant declines, XRP may follow the crash down to lower levels. In this scenario, $1.47 may not provide effective support, and the price could test deeper historical support areas. Although the probability is relatively low, the current macroeconomic uncertainty makes this tail risk hard to ignore.