XRP Funding Rates Point To Possible Price Breakout – Details

[Ben Graham]

The XRP market recorded a net negative performance in the past week, resulting in a minor 1% price decline. A very volatile market movement saw the altcoin trade as high as $2.17 before returning below the $2.10 resistance. As XRP investors eagerly await the next market move, recent on-chain data shows evidence of another impending price breakout.

XRP Negative Funding Rates Fuel Positive Market Bias

In exchange activity, funding rates refer to periodic payment mechanisms used in perpetual futures markets to keep the futures price aligned with the spot price. A positive funding rate suggests that long positions are overcrowded, which sees these long traders pay premiums to short traders to maintain their existing positions, thereby incentivizing and eventually pulling the futures price back toward the spot market.

According to market analyst PelinayPA, whenever the XRP funding rates have turned positive, there is usually an ensuing price consolidation or sharp correction. Such price movement can be attributed to the rising cost of maintaining these long positions and also the strong potential of a long squeeze, eventually causing a fall in market demand. 

On the other hand, sudden negative spikes in funding fates, especially when accompanied by a corresponding fall in funding rate, SMAs have resulted in the historical formation of a price bottom. Despite the pessimistic sentiment associated with negative funding rates, there is always a subsequent short-term price rebound. 

PelinayPA explains the XRP market sits in the latter situation as the funding rate is presently around -0.00323, while both SMA50 and SMA30 are heading downwards. Clearly, there is little optimism as short positions account for most of the existing leverage in the market. However, based on historical data, the chances of a price pullback or sustained selling pressure are presently low. 

Rather, the current funding data suggest the market is gathering momentum for a potential positive price breakout after a period of consolidation. However, PelinayPA warns that this signal does not indicate a major price rally, but only a stronger potential for an upward price move.

XRP Price Overview

At the time of writing, XRP trades at $2.06, reflecting losses of 0.24% and 0.99% in the past one and seven days, respectively. However, the monthly chart reports an impressive price gain of 13.45%, indicating that a significant portion of new market entrants are sitting in profits.  Despite these gains, XRP remains significantly below the cycle’s all-time high at $3.5. To decisively establish any form of bullish intent, XRP bulls must reclaim the immediate resistance at $2.10 before setting sights on future targets, including $2.60 and $3.00.