XRP (Ripple) Plunge, Real Cause is Leverage 'Liquidation'...A Bigger Shock Than Spot Selling

▲ XRP

XRP's recent sharp decline appears to be driven more by leverage liquidations in the derivatives market than by spot selling.

According to the cryptocurrency specialized media The Crypto Basic on June 19 (local time), XRP rose to around $1.29 earlier this week before falling by more than 13%. Many in the market attributed this to spot selling. However, market data pointed to a greater impact from leveraged traders.

According to CryptoQuant data, Binance's open interest decreased from approximately $255 million to $215.4 million in 24 hours, a decline of 14.5%. A simultaneous drop in price and open interest often indicates position liquidation or forced liquidation. Analysis suggests that many leveraged long positions were pushed out of the market during this decline.

Binance's perpetual futures Cumulative Volume Delta (CVD) also plunged. This indicator shows the difference between aggressive buying and aggressive selling in the perpetual futures market. During XRP's decline, this indicator dropped to -802.8 million, meaning that selling pressure significantly overwhelmed buying pressure in the futures market.

In contrast, selling pressure in the spot market was relatively limited. Binance's spot CVD dropped to approximately -158.7 million, which was much smaller than the decline observed in the perpetual futures market. If investors had dumped a large amount of their XRP holdings, the scale of spot selling should have been comparable to that in the futures market.

The Crypto Basic pointed out that this decline is more akin to the unwinding of leveraged positions rather than a massive exodus of long-term investors. However, it also stated that this does not mean XRP has already bottomed out. Key points to watch going forward include the stability of open interest, changes in spot CVD, and the recovery of perpetual futures CVD. If perpetual futures CVD rebounds, it could signal the return of aggressive futures buying to the market.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*