As bullish activity cools, profit-taking in XRP intensified in the second week of December.
Review the state of XRP spot liquidity and derivatives.
Just a week ago, Ripple's native currency XRP was enjoying strong bullish momentum. It even set a new high in the first week of December, the highest in 8 months, continuing the momentum from November.
Subsequently, XRP rebounded from recent highs as traders took profits. For reference, XRP reached a peak of $2.90 on December 3. It then fell back to a weekly low (so far) of $1.90, representing a 20% pullback.
This pullback suggests we now have a rough understanding of the starting and ending points of the latest rally. Drawing Fibonacci retracement levels from the bottom to the top indicates that the price may fall into the range of $1.41 to $1.69.
At the time of writing, the trading price of this cryptocurrency is $2.31. This occurred after an unexpected pullback during Tuesday's trading session. This suggests that investors anticipate more upward potential, thus a recovery in demand.
As market sentiment shifts from greed to fear, ongoing selling pressure may pave the way for further declines in XRP. Assessing demand and supply forces helps to more clearly depict the demand levels for the cryptocurrency.
XRP spot flow indicates that the highest influx of cryptocurrency occurred at the beginning of December. On December 1, the inflow peaked at $177.33 million, and the latest inflow on December 10 was $11.35 million.
The outflow of spot funds has also seen a recovery over the past 10 days. As of December 4, XRP outflows peaked at $155.79 million. The total outflow over the past 10 days exceeded inflows, reflecting a drop in funds during the same period.
What about the derivatives market? According to Coinglass data, XRP experienced a spike in negative funding rates on December 11. This indicates a surge in short sellers as bearish expectations rise.
Negative funding rates appeared after several consecutive days of declining positive funding rates, indicating that previous strong demand is cooling off.
Read Ripple [XRP] price prediction 2024-2025
These observations, along with the escalating spot flows, indicate an increasing likelihood of further declines for XRP.
However, traders should closely monitor potential changes, including demand-triggering events that may benefit XRP bulls. Extreme volatility is expected in this process, similar to what occurred on Tuesday due to liquidations.