XRP Bulls Could Face Major Risks — Here’s Why

XRP reached a yearly high of $2.85 on Dec.3, following a 431% rally triggered by Donald Trump’s presidential election win on November 5. Before this, the token had traded in a stable range between $0.48 and $0.73 for most of the year. However, the price has since dropped nearly 18%, and at the time of writing, it sits at $2.26.

XRP/USD Daily Price Chart. Source: CoinMarketCap

Bitcoin Dominance Could Impact XRP and Other Altcoins

Bitcoin’s dominance—its share of the total cryptocurrency market value—currently stands at 55.76%. Although this figure has dropped by 5% over the past week, it could rise to 60-70% before investors begin shifting capital into alternative coins (altcoins) like XRP.

Bitcoin’s dominance currently stands at 55.30%. Source: TradingView

If Bitcoin’s dominance increases further, it could trigger a “rotation” of investment away from XRP. This could result in a number of XRP leveraged positions being liquidated, which would be disastrous for traders. 

XRP Traders Continue To Take Long Position Despite Falling Prices

The market has seen a surge in leveraged long positions for XRP, where traders bet on the price rising. The open interest—a metric reflecting the number of ongoing futures and options contracts—recently reached $3.6 billion, exceeding the $2 billion recorded during XRP’s previous rally in 2021.

Token’s open interest reached $3.6B. Source: CoinGlass

Despite the falling price, traders continue to take long positions, which could lead to significant losses if prices drop further.

For instance, even a 7% retrace from $2.37 to $2.18 could wipe out $104.4 million worth of long positions. This shows the potential for large-scale liquidations if the market doesn’t stabilize.

Bitcoin Stabilization Could Bring Relief Traders

XRP’s performance compared to Bitcoin has improved recently. The token has surged 291.56% year-to-date, outperforming Bitcoin’s 121.91% gain over the same period. However, analysts warn that the token’s bull run faces risks if Bitcoin dominance rises.

XRP outperformed BTC this year. Source: TradingView

However, Bitcoin’s stabilization is key to calming market fears and encouraging more trading activity.

While funding rates—the cost of holding long or short positions—on Binance remain moderate, they are relatively high on other exchanges. High funding rates often signal increased market activity, which could lead to a correction if sentiment shifts.

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