The last two months have seen a major reset in XRP’s open interest, coinciding with the sell-off that rocked the market. Looking at past performance, historical data suggests that this open interest reset could be a major breakout for the altcoin. As prices begin to recover, the reset could provide the perfect opportunity for bulls to regain full control of the XRP price and drive it towards higher levels.
How far has XRP open interest collapsed?
To know the magnitude of this reset, it is important to look at the XRP open interest figures over the past few months. Data from Coinglass shows that in July, XRP open interest hit a new all-time high of $10.9 billion as market participation reached never-before-seen levels.
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Coincidentally, this rise to new all-time highs coincided with XRP’s open interest coming out of another reset period, ultimately leading XRP price to reach new seven-year highs. However, it didn’t take long before the bears came to strike again, and open interest dropped as the price fell.
For perspective, open interest is the total of all XRP futures or options contracts. In fact, this reflects the participation and number of bets that traders make on cryptocurrency. So, the higher the open interest, the higher the amount invested in XRP derivatives, and vice versa.
Currently, open interest sits at a low level of $3.75 billion, representing a collapse of over 65% from its peak of $10.94 billion. But this crash could be the reset the altcoin needs for a new recovery, especially as liquidity begins to return to the market due to the end of quantitative tightening by the US Federal Reserve.
Can prices reach new all-time highs?
Earlier in the year, when XRP’s open interest collapsed from its all-time highs in January, the reset ended up driving prices higher. Although the XRP price did not break its 2018 high, it came close in July. However, following this trend, the altcoin might still have some time before there is a surge.
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After the January crash, XRP’s open interest remained low over the next five months, with the price also performing moderately. With only two months since its last high, XRP open interest could remain low for a while longer before breaking out. However, if the trend continues, the resulting rally would push the price above $3 again.
Featured image from Getty Images, chart from TradingView.com
