Ripple Price Forecast: XRP Short-Term Outlook Under Pressure as Exchange Reserves Skyrocket Amid Feeble Derivatives

Exchange wallets swell as derivatives demand collapses—XRP faces perfect storm of bearish signals.

The Reserve Runaway

Ripple's exchange balances surge while derivatives markets show all the strength of wet cardboard. Trading volumes tank as open interest withers—classic signs of weakening institutional confidence.

Technical Breakdown

Price action struggles to find footing below key moving averages. Each rally attempt gets smothered by the weight of increasing supply hitting exchanges. Support levels crumble faster than a crypto influencer's credibility during a bear market.

Market Psychology Shift

Traders rotate out of XRP positions into hotter assets, leaving the token swimming against the current. The pattern mirrors previous consolidation phases—except this time, the fundamentals look decidedly shaky.

Short-term traders face brutal conditions while long-term holders cling to hopium about regulatory clarity. Meanwhile, the whales keep dumping—because nothing says 'confidence' like quietly exiting while telling everyone to HODL.

XRP exchange reserves expand amid a weak derivatives market 

XRP holders have transferred large amounts of the token into exchanges since the beginning of September, thereby increasing reserves. According to CryptoQuant data, reserves on Binance increased by 19.4% to 3.6 billion XRP from 2.9 billion XRP as of Sunday. This surge coincided with the xrp price declining from $3.18 on September 13 to around $2.70 on September 22. 

Increasing exchange reserves often signal incoming selling pressure. Investors often transfer assets to exchanges with the intention of selling. The MOVE also signals a lack of confidence in XRP's ability to sustain the uptrend. This metric is worth monitoring, as a steady increase in exchange reserves often signals headwinds that precede sell-off activities.

XRP Ledger: Exchange Reserve - Binance | Source: CryptoQuant

Meanwhile, retail interest in XRP has remained relatively suppressed since mid-July, marking the correction from the all-time high. CoinGlass data indicates that the futures Open Interest (OI), referring to the notional value of all futures contracts, averaged $7.56 billion by the time of writing on Monday after peaking at a record high of $10.94 billion on July 22. 

Low or declining OI suggests reduced market participation, as fewer traders hold positions in XRP futures. With dwindling engagement, there is less speculation, which limits short-term price movement. Sentiment around XRP could remain bearish amid declining OI, especially if the liquidation of long positions persists, leaving traders counting losses as was experienced last week.

XRP Futures Open Interest | Source: CoinGlass

Technical outlook: XRP bulls eye $3.00 breakout 

XRP fluctuates between support provided by the 100-day Exponential Moving Average (EMA) at $2.83 and the 50-day EMA resistance at $2.92. Bulls appear intent on extending the weekend recovery above the $3.00 critical level and later break above a descending trendline in place since the record high of $3.66.

Based on the Relative Strength Index (RSI), which has risen to 48, bullish momentum is building. If the RSI breaks into the bullish region above the midline, the path of least resistance could remain upward, supported by a strong tailwind as more traders are encouraged to seek exposure.

Traders will look out for a buy signal from the Moving Average Convergence Divergence (MACD) indicator before increasing or seeking exposure to the cross-border money remittance token. Such a signal manifests when the blue line crosses above the red signal line, encouraging traders to position themselves ahead of the next leg up.

XRP/USDT daily chart

Key milestones WOULD include a sustained break above the short-term 50-day EMA at $2.92, followed by gains above the descending trendline and the supply zone at $3.18. On the other hand, losing the 100-day EMA support at $2.83 could encourage risk-on sentiment, increasing the probability of XRP resuming the downtrend toward the near-term support at $2.70 and the 200-day EMA at $2.61.

Open Interest, funding rate FAQs

How does Open Interest affect cryptocurrency prices?

Higher Open Interest is associated with higher liquidity and new capital inflow to the market. This is considered the equivalent of increase in efficiency and the ongoing trend continues. When Open Interest decreases, it is considered a sign of liquidation in the market, investors are leaving and the overall demand for an asset is on a decline, fueling a bearish sentiment among investors.

How does Funding rates affect cryptocurrency prices?

Funding fees bridge the difference between spot prices and prices of futures contracts of an asset by increasing liquidation risks faced by traders. A consistently high and positive funding rate implies there is a bullish sentiment among market participants and there is an expectation of a price hike. A consistently negative funding rate for an asset implies a bearish sentiment, indicating that traders expect the cryptocurrency’s price to fall and a bearish trend reversal is likely to occur.