XRP derivatives markets include: still showing signs of bearish pressure, with funding rates on major exchanges currently at negative levels. According to real-time data, funding rates have remained mostly below zero in recent trading sessions, with the lowest exchange funding rate recorded being around -0.0748%.

At the same time, open interest has returned to levels associated with long-term base zones in previous years. Can this environment lead to a turning point, or are further declines still developing in XRP price action?

Bearish derivatives positioning shows deeply negative financing

In real time funding rates with Coinglass reveal that average XRP funding on major exchanges has dropped to negative readings, with several cryptocurrency exchanges seeing bearish rates. At the time of writing, the lowest funding observed was -0.0748%, clearly indicating that tiny sentiment is currently dominant.

Negative financing rates means that tiny futures positions bring profits to long positions, and bearish bets outweigh bullish bets on all exchanges. In practice, strongly negative financing may reflect an overflow of tiny exposure. However, this is a condition that sometimes precedes a piercing rebound if the price begins to stabilize, as the tiny seller may eventually be forced to cover.

Technical analysis posted on social media platform As it stands, this ratio is currently at its lowest level since the end of 2022, and was only exceeded in the week of the FTX crash in November 2022. Interestingly, the then prolonged period of negative financing reached its minimum in 2022.

Open interest returns to long-term baseline levels

Interest in open offers has also dropped significantly with financing at a negative level. The weekly aggregate open interest rate is now at levels comparable to previous multi-year accumulation bases. This base, shown in the chart above, has been the baseline for open interest since October 2022. Since then, each time open interest reopens in this zone, it has rebounded to higher levels.

In terms of price action, XRP is struggling to find a sustainable bottom as the broader cryptocurrency market has yet to turn bullish. In the current situation, XRP now needs to hold above the two intermediate supports. The first one is around $1.45 where the last daily candles have registered wicks. Below that is the larger demand area, spanning roughly $1.15-$1.30.

On the one hand, a negative funding rate indicates bearish positioning pressure, but history shows that this has always occurred just before lows. At the time of writing, XRP is trading at $1.49, although it has recently traded above $1.60 at the weekly open. The first step to this will be a weekly close above $1.50 confirming a return to bullish momentum.

Featured image from iStock, chart from Tradingview.com