XRP News Today: XRP Fails to Rally Despite Bullish Developments, Declines 6%

XRP, the cryptocurrency associated with Ripple Labs, has experienced a period of underperformance despite two significant bullish developments. On March 6, XRP was listed as a candidate for the United States' “Digital Asset Reserve,” and on May 8, Ripple Labs settled a multi-year-long complaint with the US Securities and Exchange Commission. Despite these developments, XRP has failed to respond positively, with a 6% decline in the three months leading up to May 22, while the overall crypto market capitalization rose by 10%.

One of the key factors contributing to the underperformance is the increased demand for leveraged XRP positions. The aggregate open interest on XRP futures on major exchanges jumped to 923 million XRP on May 22, up 31% from two weeks prior. This $2.2 billion position in futures markets signals growing interest from traders, but it is not necessarily bullish, as those instruments can also be used to speculate on the XRP price downside. Some traders argue that the increased demand for leveraged XRP positions indicates growing institutional interest, especially as multiple issuers filed for a spot XRP exchange-traded fund (ETF) listing in the US. However, the final decision by the US SEC should be made in October.

Another factor is the positive funding rate, which means longs (buyers) are the ones paying the carry cost. As cryptocurrency traders are generally optimistic, a 7% to 14% annualized funding rate is expected in neutral markets, while periods of FOMO can push the indicator above 50%. The annualized funding rate jumped to 19% on May 22, nearing the highest levels in six months. Still, the current optimism level is nowhere near the 100% annualized funding rate from Dec. 4, 2024, which followed an impressive 7-day rally to $2.90 from $1.33. Far from being bearish, the current level leaves room for bullish positioning on XRP futures markets.

Part of the limited XRP price upside can be explained by the multiple rejections of US Senator Cynthia Lummis, Chair of the US Congress Digital Assets Subcommittee, to meet Ripple representatives. Ripple CEO Brad Garlinghouse asked on May 19 that the lawmaker “reconsider and be a leader for ALL of crypto,” and discuss “how to make the US the crypto capital of the world.” There is nothing stopping XRP from hitting $3.50 or even higher, as Ripple Labs is no longer facing direct threats from regulators, which paves the way for partnerships and acquisitions. Historically, XRP has reacted very positively following those announcements, and the $2.2 billion futures open interest could help catapult XRP price above the current $3.25 all-time high.

In summary, despite two extremely bullish developments, XRP has failed to respond positively. The increased demand for leveraged XRP positions and the positive funding rate indicate growing institutional interest, but the final decision by the US SEC on a spot XRP ETF listing is still pending. The multiple rejections of US Senator Cynthia Lummis to meet Ripple representatives and the lack of partnerships and acquisitions are also contributing factors to the underperformance. However, the current level leaves room for bullish positioning on XRP futures markets, and there is nothing stopping XRP from hitting $3.50 or even higher in the future.