The recent decline in the value of Ripple (XRP) due to high levels of leverage remaining in the market has resulted in a large-scale derivatives reset. At its peak during this period, approximately $3 million in long positions were liquidated, forcing bullish traders to hedge risk.
Moreover, Funding Rates have turned sharply negative, reflecting the strong bearish sentiment on XRP’s future price movement. Additionally, Open Interest (OI) decreased from approximately $1.18 billion to approximately $1.04 billion.
These factors suggest that speculative excess is starting to eliminate leverage-driven selling pressure. Although stable Binance reserves indicate that spot holders are still unwilling to sell aggressively.
If OI starts to rebuild with increased funding rate then XRP may begin an upward trend towards a healthier recovery. However, if these trends do not begin to occur simultaneously, the downward trend is likely to continue.
XRP is entering historical oversold territory
As long-term declines continue in XRP, it is possible that the overall market may enter historically extreme downside risk conditions as sellers continue to outpace buyers.
Additionally, the prolonged decline caused the Sharpe Z-Score to drop further into negative territory. These levels reflect the overreading before the breakout in November 2024 and the rally in July 2025.
Despite this, XRP remains well below the 200-day Moving Average near $1.03, confirming that buyers have not yet taken control of the overall trend. This combination suggests that downside momentum may be running out rather than accelerating further.
The current reset could turn into another phase of recovery if fresh spot demand returns and prices return to key technical levels. Otherwise, XRP may continue consolidating until stronger buying confirms the historical signal.
Final Summary
- XRP deleveraging reduces speculative excess, but stronger spot demand is still necessary for a sustainable recovery.
- Historical oversold signals for XRP suggest that the downtrend is continuing, but confirmation of the uptrend still depends on renewed buying pressure.
