XRP Funding Rate Dips to Historic Lows as Traders Eye Short Squeeze Potential

• XRP’s funding rate is at levels last seen when the price was $0.33.
• The cryptocurrency is holding above $2 with low open interest.
• Analyst suggests a potential short squeeze could trigger the next move.

XRP’s funding rate has dropped to negative 0.012%, a level last seen when the asset traded near $0.33. Despite this indicator often associated with bearish pressure, XRP currently holds above the key $2.10 support level. 

Popular crypto analyst CryptoinsightUK pointed out this similarity in a tweet, noting that traders appear hesitant, with open interest remaining low. If bullish momentum builds, a short squeeze could drive the next price surge.

What Do Funding Rates, OI, and Volume Indicate?

CryptoinsightUK shared a chart highlighting that XRP’s funding rate sits at historic lows. Funding rates indicate the cost required to hold leveraged positions in perpetual futures contracts. Negative rates typically suggest that short positions (bets on price decline) dominate the market, as shorts must pay longs.

Related: Top Analyst Identifies Technical Pattern to Drive XRP Prices to $4.60

From the chart, XRP OI stands near 591 million coins (worth approximately $1.18 billion), a relatively low figure compared to past peaks during strong trends. This low OI signals that many traders likely await a clearer market direction before committing substantial capital. 

Spot market volume also remains subdued, recorded near 107 million coins daily, further indicating caution among participants. XRP’s price reflected this broader pressure, dropping 14.5% over the past week.

Derivatives Data Shows Mixed Signals: Futures Cool, Options Heat Up?

The latest data from Coinglass reveals that XRP’s derivatives market has seen its volume declining by 17.62% to $7.12 billion and open interest dropping by 3.67% to $3.56 billion.

However, options volume has surged by 120.23%, reaching $7,500, and options open interest has increased by 146.96%, hitting $983,490. 

These figures highlight a mix of declining activity in perpetual futures but growing interest in options, indicating that traders might be positioning for potential volatility.

Could Negative Funding Rates Fuel an XRP Short Squeeze?

A potential short squeeze remains a key scenario. If XRP experiences upward momentum, traders with short positions may be forced to buy back at higher prices, accelerating a breakout. This pattern has historically led to sharp price increases in the crypto market.

Related: XRP’s Early Pullback After Lawsuit’s End Leaves Users Disappointed

Broader market sentiment remains a critical factor for XRP as well. Its price movement will likely depend significantly on overall crypto market direction and particularly Bitcoin’s performance. 

Bitcoin had earlier dipped to $81,000 that triggered related drops in many altcoins, including XRP. This move pushed XRP dangerously close to losing the key $2 psychological support level.