{"id":257948,"date":"2021-05-25T01:38:34","date_gmt":"2021-05-24T22:38:34","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/whos-bullish-now-xrp-below-1-futures-open-interest-down-by-75\/"},"modified":"2021-05-25T01:38:34","modified_gmt":"2021-05-24T22:38:34","slug":"whos-bullish-now-xrp-below-1-futures-open-interest-down-by-75","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/whos-bullish-now-xrp-below-1-futures-open-interest-down-by-75\/","title":{"rendered":"#Who&#039;s bullish now? XRP below $1, futures open interest down by 75%"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a418d54c7824\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a418d54c7824\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/whos-bullish-now-xrp-below-1-futures-open-interest-down-by-75\/#Volumes_spiked_in_unison_which_is_healthy\" >Volumes spiked in unison, which is healthy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/whos-bullish-now-xrp-below-1-futures-open-interest-down-by-75\/#The_futures_premium_reached_unsustainable_levels\" >The futures premium reached unsustainable levels<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/whos-bullish-now-xrp-below-1-futures-open-interest-down-by-75\/#Markets_tend_to_exaggerate_in_both_directions\" >Markets tend to exaggerate in both directions<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#Who&#039;s bullish now? XRP below $1, futures open interest down by 75%<\/strong>&#8221;<\/p>\n<p style=\"float:right;margin:0 0 10px 15px;width:240px\"><img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDUvYWI4NzAzNzMtNjU0Zi00NWYyLWFkMjgtNTAxZDQwMzI1MWM0LmpwZw==.jpg\" class=\"type:primaryImage\"><\/p>\n<pre><code>                Traders are clearly nervous after XRP corrected by 54%, and the futures open interest premium flipped negative.\n                &lt;p&gt;XRP price soared 260% in April, moving from $0.57 on March 31 to $1.97 on April 14, its highest level since January 2018. The move caused XRP futures to reach an impressive $2.1 billion open interest.\u00a0\n<\/code><\/pre>\n<p>However, on May 19, as cryptocurrency markets collapsed, XRP lost 60% in 4 days, liquidating $510 million long positions. The futures open interest retraced to $550 million, roughly the same level from early February when the altcoin traded near $0.40.<\/p>\n<p>Investors are now questioning if XRP futures will ever be able to recover to a multi-billion market. Were April&#8217;s figures inflated by excessive leverage, or is it just a matter of time until it rebounds to the previous levels?<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-05\/7355e8b2-e23b-45e5-8a83-e8eedfb8bee9.png\" \/><figcaption style=\"text-align: center\"><em>XRP futures aggregate open interest. Source: Bybt<\/em><\/figcaption><\/figure>\n<p>To understand if the $2.1 billion futures market was an anomaly, one needed to analyze volumes and, more importantly, their premium. This indicator measures the price gap between the futures contract prices and the regular spot market.<\/p>\n<p>If some unprecedented bullishness was set in place, there&#8217;s a good chance that futures open interest will take months to regain the impressive levels seen previously. Not only would traders&#8217; confidence take longer to recover, but an exaggerated premium could have been inflating the derivatives markets.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Volumes_spiked_in_unison_which_is_healthy\"><\/span>Volumes spiked in unison, which is healthy<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The volume of futures markets provides a hint on whether some unusual phenomena took place. By comparing this data with regular XRP spot markets, there should be a clear correlation, and futures volumes must have grown considerably to sustain the $2.1 billion open interest.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-05\/df99dfc2-9092-4f9f-a860-4f0513ab33ba.png\" \/><figcaption style=\"text-align: center\"><em>XRP futures aggregate volumes (above) versus spot exchanges, USD. Source: Coinalyze.net<\/em><\/figcaption><\/figure>\n<p>Although there was a significant spike on April 5, the movement was accompanied by regular spot exchange volumes. Moreover, the $10 billion daily turnover in futures markets is more than enough to sustain the $2.1 billion open interest.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_futures_premium_reached_unsustainable_levels\"><\/span>The futures premium reached unsustainable levels<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>To assess whether traders could have created an unusual open interest based on excessive optimism, one needs to analyze futures prices premium versus regular spot markets. The 3-month futures should usually trade at a 1.2% to 2.4% premium, or 8% to 15% annualized.<\/p>\n<p>Futures contract sellers are essentially postponing the trade, therefore requiring more money to compensate. However, during extremely bullish markets, the premium can soar well above 3.8%, which is equivalent to 25% per year.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-05\/24ad9a8e-b53e-42ee-b433-6e34e94e040e.png\" \/><figcaption style=\"text-align: center\"><em>Binance June XRP futures premium versus spot markets. Source: TradingView<\/em><\/figcaption><\/figure>\n<p>As depicted above, June contracts traded almost 10% above regular spot exchanges. That is nothing short of spectacular as it represents a 75% annualized premium. However, these levels are completely unsustainable and transpire excessive leverage from buyers.<\/p>\n<p>Cryptocurrency markets are highly volatile, and no one should bet that any event will not repeat itself. However, there is some indication that traders became so confident of themselves that they refused to reduce positions even if being paid 8% or 9% above market levels.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Markets_tend_to_exaggerate_in_both_directions\"><\/span>Markets tend to exaggerate in both directions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Therefore, there is reason to believe that the current $600 billion futures open interest and negative premium signals excessive fear and does not correctly reflect the market. XRP price has risen 294% in 2021, and the recent Ripple Labs <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">news<\/a> regarding the United States Securities and Exchange Commission lawsuit is somewhat encouraging.<\/p>\n<p>Investors are not wrong to expect the futures open interest to recover the $1 billion mark as XRP holds above $0.80. However, it is unlikely that the markets will reach a 50% or higher annualized premium, let alone a $2 billion open interest anytime soon. It usually takes some time for longs to regain confidence, which is healthy for another leg up.<\/p>\n<p><em>The views and opinions expressed here are solely those of the <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/noshitcoins\"><em>author<\/em><\/a><em> and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.<\/em><\/p>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more News articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/who-s-bullish-now-xrp-below-1-futures-open-interest-down-by-75\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;#Who&#039;s bullish now? XRP below $1, futures open interest down by 75%&#8221; Traders are clearly nervous after XRP corrected by 54%, and the futures open interest premium flipped negative. &lt;p&gt;XRP price soared 260% in April, moving from $0.57 on March 31 to $1.97 on April 14, its highest level since January 2018. The move caused&#8230;<\/p>\n","protected":false},"author":1,"featured_media":257949,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDUvYWI4NzAzNzMtNjU0Zi00NWYyLWFkMjgtNTAxZDQwMzI1MWM0LmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[],"class_list":["post-257948","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/257948","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=257948"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/257948\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/257949"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=257948"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=257948"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=257948"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}