XRP Defends Support Levels Amid Sharp Spot Selling and Leverage Reduction

XRP has held its ground near key support levels despite a sharp increase in spot selling and a reduction in leverage positions. In recent weeks, leverage positions in the XRP market have been shrinking quickly, with open interest falling to around $219 million on Binance from about $323 million on August 22, down 32% in less than four weeks.

This suggests that existing leverage positions may have been reduced ahead of any expansion in new short selling. A similar move was seen across the broader derivatives market, with total XRP derivatives open interest falling to around $871 million on September 17 from about $1.13 billion in mid-August, a drop of over $250 million in under a month.

The selling pressure was stronger in the spot market, with Binance perpetual futures CVD worsening to around minus $1.0 billion from about minus $361 million over the same period. This implies that spot selling dominance has widened by around $2.0 billion.

However, falling open interest can reduce excessive leverage that can amplify further sharp declines. With fewer high-leverage long positions remaining, the risk of cascading forced liquidations could be lower than before even if XRP falls again. If buying demand returns, a short squeeze could also occur.