False weakness? Could Ripple (XRP) be preparing for a violent move?

XRP climbs while open interest declines. This suggests that short covering is behind the move.

XRP currently appears to have one of the most interesting derivatives setups among large-cap altcoins. On the surface, the price is slowly increasing, while open interest is decreasing.

Normally, this suggests that traders are moving away from the market. But when this happens alongside an increase in net position delta, it may be time to pay attention.

XRP is rising, here is the bullish signal to watch

The current uptrend of the past few days appears to be driven more by closing short positions than by further aggressive buying, according to one analyst. Simply put, bearish traders appear to be exiting the market, and this short selling covering pressure is helping to push the price of XRP higher.

This can certainly support a steady rise, but it is nowhere near enough for a sustainable rally. True acceleration generally tends to occur when new buyers begin to enter the market with conviction.

This is why open interest is so important. A decline in open interest suggests that leverage is being reduced – not added – which is generally a sign of declining conviction.

The daily outlook also supports a cautious bullish bias. XRP closed higher during yesterday’s trading session, but it still needs to maintain it to avoid falling back into weaker territory. This is why a move towards resistance at $1.13 remains very important, while stronger momentum could help push it even higher.

Shorts get squeezed

That said, the real trigger traders should watch for is the simultaneous increase in open interest and net position delta. This suggests that the market is moving from a state where the rise is driven by closing short positions to a state where long positions are opening.

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If this change occurs, the price of XRP could accelerate even faster.

Intraday, the cryptocurrency remains relatively volatile and stuck in a range. If it manages to break above and hold $1.18, it could provide buyers with an opportunity to make a strong comeback.

For now, the signal remains rather clear. The bears appear to be loosening their grip, but the bulls have yet to intervene convincingly.