XRP Price News: XRP Faces Strong Compression as Speculative Activity Fades

XRP (XRP) has dropped by nearly 3% in the past 24 hours and, once again, the token is diving to the $2 level a day after the FOMC meeting.

The U.S. central bank cut rates for a third time this year. However, its Chairman, Jerome Powell, emphasized that it may take a while for the next cut to materialize. At least he does not see a real chance of a rate increase at the time.

The market initially reacted positively to the news, but XRP is now shedding most of this week’s gains as selling pressure seems to be increasing.

Speculative activity has dropped dramatically since the October 10 flash crash wiped out thousands of traders.

Open Interest (OI) in XRP Futures – Source: CoinGlass

Data from CoinGlass shows that open interest (OI) in XRP futures collapsed from $8.4 billion during the crash to $3.7 billion at the time of writing. Did Trump break the market?

Similarly, the token’s funding rate has been trending lower since November 20, peaking at 0.0095% back then, while it now sits at 0.0019%.

Meanwhile, on-chain data shows that network fees have been progressively collapsing since January this year, moving from a peak of around 6,000 XRP tokens to less than 1,000 XRP at the time of writing.

Interestingly, fees were still dipping even though the price of XRP neared an all-time high at some point in May. This indicates that it was speculative activity, not network usage, what propelled the price of this altcoin primarily in the past few months.

XRP ETFs Have Done Little to Help the Token Recover

A flood of exchange-traded funds (ETFs) hitting Wall Street lately has not done much to push the price higher, even though the combined amount of assets held in these vehicles is rapidly approaching the $1 billion mark.

XRP ETFs Daily Net Inflows – Source: SoSo Value

Ripple has been making progress to grow its global footprint by securing key licenses in New York, Dubai, and Singapore to offer its solutions for cross-border enterprise payments.

Meanwhile, the market cap of its Ripple USD (RLUSD) stablecoin has jumped from $50 million to $1 billion in a year.

Nonetheless, despite these ecosystem growth initiatives, the XRP Ledger does not seem to be benefiting, as it should, by collecting higher fees.

Hence, for XRP to move back to the levels we saw back in May, speculators need to go back to the market. As a result, open interest is perhaps the most relevant metric to watch in the next few months.

XRP Experiences Price Compression – Is $2 The Tipping Point?

The daily chart shows that XRP has hit a key support area once again at $2. This threshold has acted as a bouncing pad in the past few weeks, although none of these upticks have led to a significant jump in the price.

XRP/USD Daily Chart (Binance) – Source: TradingView

The $2.20 level remains the key resistance to watch as a move above this mark would invalidate XRP’s downtrend. Trading volumes remain low at 3% of the token’s circulating market cap, indicating that the market has not yet hit a contested area.

The Relative Strength Index (RSI) shows a compression pattern, meaning that XRP remains in consolidation. The market must now make a strong move to get the price going in any direction.

December has been a mixed month for cryptocurrencies historically. In 7 out of the last 13 years, the top crypto has performed negatively during this month. Hence, the price action will dictate how XRP could perform in the next few days.

A move above $2.2 could set things in motion for a rapid climb to $3, while a break below $1.95 could result in a much deeper correction for XRP in the near term, possibly targeting the $1.6 level.