XRP Faces Funding Rate Reset Risk as Derivatives Data Flashes Warning

XRP is showing signs of growing pressure as new Binance derivatives data points to a market that may not have finished its correction.

While the token continues to trade above the important support level at $1, several key derivatives indicators suggest traders should remain cautious. 

Specifically, falling Open Interest, rising funding rates, and a sharp increase in long liquidations have created conditions that often lead to a short-term pullback before the market finds a stronger footing.

XRP currently trades at $1.10, down 4.23% over the past seven days. Although the price has recovered from some of its recent losses, the latest derivatives data suggests that the market is still adjusting after weeks of heavy positioning.

Spot Activity Suggests Traders Are Repositioning

Notably, Binance recorded a noticeable increase in XRP spot activity between July 4 and July 8, with large amounts of the token moving into and out of the exchange. 

The biggest movement came on July 7, when 64.9 million XRP entered Binance while 49.2 million XRP left the platform. This left the exchange with a net inflow of roughly 15.7 million XRP for the day.

However, these figures do not necessarily indicate fresh buying. The large volumes on both sides suggest that existing holders were moving funds and adjusting their positions instead of opening major new long trades.

XRP Open Interest Continues to Fall

Also, the derivatives market has steadily lost leverage over the past few weeks. Specifically, Binance XRP Open Interest exceeded $500 million in mid-June before dropping to $431 million by July 4. The decline continued over the following days, with Open Interest falling further to $399 million by July 10.

This marked a drop of more than $100 million in about three weeks, showing that leveraged traders have continued to reduce their exposure instead of increasing it.

Liquidation data show a similar trend. Long liquidations jumped 94% compared with the previous week and climbed 172% above the three-month average. 

In contrast, short liquidations fell 53%, showing that bullish traders absorbed most of the losses. This suggests that every recent attempt to push XRP higher has met strong selling pressure, forcing more long positions out of the market.

XRP Funding Rate Trend

In addition, toward the end of June, Binance funding rates briefly turned negative, showing that short positions had gained the upper hand and that long traders were collecting funding payments. The situation changed almost immediately, as funding rates then climbed 266% to reach 0.007.

This shows that fewer leveraged positions remain open, yet traders who are still holding long positions now pay higher funding costs. 

Markets have often responded to similar conditions with a funding rate reset, where another round of long liquidations pushes prices lower, brings funding rates back to normal, and clears out excess leverage before a healthier recovery begins.

XRP Approaches a Key Turning Point

XRP’s recent price movement reflects what has happened in the derivatives market. After falling 22% during June, the token recovered to $1.18 by July 4. However, it failed to hold that level and slipped to $1.08 by July 8, around the same time long liquidations reached their highest levels.

The price has since recovered slightly to $1.10, leaving XRP with a 6.62% gain for July despite its recent weekly decline. However, the market still faces strong resistance above current levels.

For now, $1.08 remains the key support level. A break below it could confirm that the expected funding rate reset has started, increasing the chances of another wave of selling from leveraged long positions. 

On the other hand, a move above $1.16, followed by a breakout past $1.18, would show that XRP has worked through its deleveraging phase without another sharp decline.