XRP, Retail Investors Rush to Bet on Decline...Will the $3.6 Myth Be Recreated?

▲ XRP/AI-generated image

XRP is sending on-chain signals similar to those just before last year's explosive surge that saw it reach an all-time high of $3.6, increasing the likelihood of a price surge through a massive short squeeze.

Crypto media outlet NewsBTC reported on May 11 (local time) that XRP's funding rate continues to remain in negative territory for an extended period, an unusual situation. CryptoQuant analyst Darkfost highlighted that XRP's funding rate on Binance has been negative since February. This means that despite the price rebounding by approximately 27% from its February low of $1.10, the majority of traders are still betting on a decline. The discrepancy between market's negative sentiment and actual price movement is interpreted as a precursor to a strong trend reversal.

Looking at past cases, a strikingly similar situation occurred in April 2025. At that time, XRP was trading around $1.25 after a sharp drop, and its funding rate turned negative for the first time in 16 months, remaining so until June. While the majority of investors anticipated a decline and built up short positions, the price quietly bottomed out and prepared for an ascent. Eventually, an explosive rally began when the funding rate turned positive, and XRP surged by 126% in a single month of July, breaking its all-time high of $3.6.

The capital flow in the overall altcoin market is also showing positive changes. The TOTAL3 index, which measures market capitalization excluding Bitcoin (BTC), Ethereum (ETH), and stablecoins, saw over $540 billion in capital outflow during the correction period at the beginning of this year. However, since early February, approximately $125 billion in capital has flowed back in, indicating a gradual recovery in overall market investor sentiment. As investors slowly return to risk assets, XRP is accumulating energy with concentrated bearish bets.

Darkfost emphasized that a strong rebound occurs when the majority of traders maintain negative positions after a price drop of over 60%. Investors currently holding short positions will be pressured to buy back their holdings to avoid forced liquidation if the price breaks through a certain resistance level. This sequential buying pressure, known as a short squeeze, acts as a catalyst, accelerating the pace of price increases. The current duration of the funding rate is recorded as the longest in recent history.

Despite market skepticism, XRP is demonstrating robust resilience and is weighing a technical breakout point. The extreme skew in the funding rate and the movement of capital off exchanges are factors that exacerbate supply shortages. If the scenario of a 126% surge in July last year is replicated, XRP is expected to once again take market leadership and enter a new price discovery phase. Investors are closely monitoring the sharp volatility and potential for an upward breakout that could occur as bearish bets are liquidated.

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