XRP price may be nearing a bottom as analyst sees rally to $2

The XRP price is at a crucial juncture after the cryptocurrency lost around 15% of its value earlier this month. While the amount of XRP on crypto exchanges climbs towards its highest level of the past year, leveraged positions are steadily disappearing from the market. Yet crypto analyst Ali Martinez sees a positive signal. In his view, the recent explosion in transaction volume may indicate that XRP is forming a bottom around $1.25, after which a recovery towards $2 could become possible.

XRP reserves approach highest level of the year

Data from CryptoQuant shows that crypto exchanges held a combined total of around 11.81 billion XRP on 17 October. That puts the reserves in the 99th percentile for the past 365 days.

This means the amount of XRP on trading platforms is approaching its highest level of the past year. A large stock on exchanges can create additional selling pressure, as investors can more easily sell their coins there.

According to analyst CryptoOnchain, it is particularly notable that the increase is not evenly distributed across all exchanges. Binance holds around 2.67 billion XRP, which corresponds to only the 30th percentile of its own annual reserves.

At the same time, over the past week Binance has received an average of 9.3 million XRP per day more than has left the exchange. Inflows of 22 million and 29 million XRP on 13 and 14 October respectively stand out in particular.

Traders close leveraged positions en masse

While reserves are rising, activity in the derivatives market is falling. XRP open interest on Binance fell from $538.1 million on 4 October to $453 million on 17 October. That is a decline of 15.8%.

In addition, $25.7 million worth of long positions were liquidated on 7 and 8 October. Over the same period, XRP fell from $1.52 to $1.29, a drop of around 15%.

The leverage ratio also fell from 0.205 to 0.170. In addition, funding rates were negative on six of the past eleven days.

According to CryptoOnchain, this indicates that traders are reducing their risky positions. Meanwhile, the amount of XRP on exchanges remains high, meaning the market may first face a period of sideways price movement.

Activity among large investors is also declining. Whale trading volume is down 44% week on week, while the number of tokens moved has fallen by 37%.

Can XRP rise from $1.25 to $2?

Ali Martinez, by contrast, sees a potentially bullish signal on the XRP Ledger. According to the analyst, the total value of onchain transactions has suddenly risen to $49.7 billion, while the price is moving around the key support level of $1.25.

That explosive activity coincides with a recovery in XRP. Martinez therefore suspects that the price is reaching a temporary low around $1.25.

If buyers manage to hold this support, he sees room for another rise towards $2. From $1.25, that would represent a potential gain of 60%.

Even so, the data do not paint an unambiguously bullish picture. The high transaction volume may point to renewed interest, but it does not prove that investors are buying XRP en masse. Moreover, the large stock on exchanges remains a potential risk.

For now, therefore, the key question is whether XRP stays above $1.25 and whether the large exchange reserves actually lead to additional selling.