XRP encounters mounting selling pressure as derivatives traders pile into short positions, raising the probability of a retest toward $1.90 despite record-breaking on-chain activity signaling peak network engagement.
XRP is experiencing heightened volatility as bearish sentiment grips the futures market, with short positions gaining dominance and negative funding rates signaling widespread downside bets among derivatives traders.
The cryptocurrency has entered a clear downtrend in recent weeks, with market structure indicating that further losses could materialize in the near term.
Data from CryptoQuant reveals that funding rates have turned predominantly negative, reflecting a market where traders are aggressively opening positions that profit from price declines.
Negative funding occurs when short positions outnumber long positions in the derivatives market, forcing short traders to pay fees to long holders. This dynamic creates consistent selling pressure as bearish traders maintain their positions, discouraging fresh capital from entering long trades.
The current funding environment shows deepening negativity, though it has not yet reached extreme levels that typically precede violent short squeezes.
When futures positioning aligns with falling prices, the trend often gains momentum as both spot and derivatives markets move in tandem.
This confirmation between price action and trader sentiment increases the likelihood that XRP could retest the $2.00 to $1.90 zone in the coming sessions. The persistent short pressure keeps bullish appetite suppressed, creating a feedback loop that reinforces the downward trajectory.
Network Activity Reaches Annual Peak
While derivatives markets flash warning signals, on-chain metrics paint a contrasting picture of intense network engagement. On December 2, the Velocity metric for the XRP Ledger experienced a dramatic surge, climbing to a yearly high of 0.0324 according to CryptoQuant analysis.
Velocity measures how frequently an asset circulates across its network, serving as a proxy for economic activity and transaction volume. This sharp spike indicates that XRP tokens are rapidly changing hands among market participants rather than sitting idle in long-term storage wallets.
The elevated circulation velocity suggests high liquidity conditions and substantial involvement from both active traders and large holders commonly referred to as whales.
This level of activity confirms that the network is experiencing one of its most dynamic periods in 2025, with user engagement reaching unprecedented levels for the year. Such movement typically accompanies significant price events, whether upward breakouts or downward capitulations.
The divergence between bearish futures positioning and robust on-chain activity creates an intriguing setup. While shorts dominate derivatives markets, the actual XRP network shows no signs of declining engagement. This disconnect suggests that real economic activity continues despite negative price momentum in speculative markets.
Critical Price Levels Define Next Move
Technical analysis reveals that XRP currently trades within a decisive range, with key levels determining whether bears or bulls will control the next major move.
According to analyst Ali Charts on X, a breakout above $2.28 would open the door for a rally toward $2.75, representing significant upside potential from current levels.
However, the immediate bias remains tilted toward the downside given the current market structure. If negative funding rates deepen further and cross below the -0.01 threshold, downward pressure could accelerate, pushing XRP toward the $1.90 support zone.
This level represents a critical test for bulls, as a break below could trigger additional selling from stop-loss orders and momentum traders.
An alternative scenario exists if short positioning becomes too crowded. Markets often move against the most populated positions to clear liquidity and trigger cascading liquidations.
If negative funding intensifies in the coming days, XRP could temporarily consolidate sideways before launching a sharp rally toward the $2.25 to $2.35 range.
Such a move would target accumulated short stops, liquidating bearish positions and forcing short sellers to buy back their positions at higher prices. This creates a feedback loop known as a short squeeze, where covering drives prices even higher.
The current setup does not yet show extreme short positioning required for a high-probability squeeze, but further deterioration in funding rates could create that environment.
The convergence of negative funding, declining prices, and elevated on-chain velocity creates a complex picture for XRP traders. Derivatives markets reflect widespread bearish conviction, while network fundamentals demonstrate robust activity.
The resolution of this tension will likely define XRP price action in the near term, with the $1.90 and $2.28 levels serving as critical battlegrounds between bulls and bears.
Market participants await clarity on whether mounting short positions will drive prices lower or create the conditions for a violent reversal higher as liquidity targets get triggered on either side of the current trading range.
Key Takeaways:
- XRP short positions dominate as negative funding deepens, increasing downside risk toward $1.90 support level
- On-chain velocity hits 2025 peak at 0.0324, signaling record transaction activity despite bearish sentiment
- Breakout above $2.28 could trigger rally to $2.75, while funding below -0.01 threatens further losses
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XRP Faces $1.90 Crash Risk Amid Surging Shorts
XRP shorts dominate as negative funding deepens. On-chain velocity hits 2025 peak while bears target $1.90. Can bulls trigger a $2.75 breakout instead?