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XRP (Ripple) has recorded its highest leverage ratio on Binance in two months, raising red flags that a large-scale cascade of liquidations could occur if the price direction reverses. With the failure to break the key supply zone of $1.50 and the speculative energy in the derivatives market reaching its limit, concerns are spreading among investors that a 'long squeeze' could be triggered.
According to crypto news outlet Finbold on May 16 (local time), an analysis of CryptoQuant data revealed that XRP's estimated leverage ratio (ELR) on Binance surged to approximately 0.179 as of May 15. This indicates that the exposure to derivatives relative to underlying capital has risen to its highest level in the past two months. Notably, this surge occurred as XRP was retesting the strong resistance level around $1.50, adding to market tension.
In light of past instances, such a high leverage ratio significantly increases the likelihood of a long squeeze scenario, where excessively set long (buy) positions are forcibly liquidated during a price downturn. Indeed, in mid-March, immediately after Binance's ELR surpassed 0.18, leveraged positions were unwound en masse, causing XRP's price to plummet over 17% from $1.50 to $1.27 in one go. Analysis suggests that the current market structure is sending very similar warning signals to that period.
Recent price movements are also exacerbating short-term downward pressure. As of the time of reporting, XRP's price has fallen by approximately 2% over 24 hours, dropping to the $1.44 level. This phenomenon, where the price declines while the leverage ratio continues to soar, is interpreted as a classic indicator suggesting that a sharp price correction could occur soon as market imbalances are resolved.
Market sentiment is also unfavorable. Despite news of the passage of the U.S. cryptocurrency market structure bill, the CLARITY Act, which aims to legalize virtual assets, the market has reacted coldly, treating it as a 'sell the news' opportunity. XRP has been trapped in a sideways consolidation for several weeks, with bears holding the upper hand, and even positive legislative news has failed to push the price above resistance, leading to an accumulation of disappointing sell-offs.
Ultimately, high leverage is a double-edged sword: it maximizes profits in a bull market, but at a time of slowing momentum like now, it carries a high risk of triggering a crash. Experts warn that if leverage is not unwound at major exchanges, including Binance, the nightmare of March could recur if the $1.44 support level breaks. Investors should prioritize monitoring the future developments of the CLARITY Act along with the resolution of overheating in the derivatives market.
*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*
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