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Bitcoinist 2025-12-16 18:00:23

XRP Traders Reducing Exposure? Estimated Leverage Ratio Slides Deeper – What This Means For Price

Following the sudden pullback observed across the cryptocurrency market, the price of XRP has fallen sharply, causing it to revisit the $1.8 threshold. With XRP’s price facing heightened bearish pressure, traders appear to be stepping back, raising questions about the current price action. Leverage Unwinds Across XRP Markets XRP’s waning price action is starting to trigger a crucial shift in investors’ action and sentiment toward the leading altcoin. A widely monitored derivatives metric outlined by Arab Chain, an author at CryptoQuant, is still trending lower, suggesting that the market risk balance for the altcoin is subtly recalibrating. Specifically, the Estimated Leverage Ratio (ELR) for XRP, a metric that monitors the amount of borrowed capital traders use in relation to exchange balances, is showing a persistent downtrend. Typically, a continued decline in the measure is a clear sign of reduced risk in the derivatives market. After examining the XRP’s ELR on Binance , the world’s largest cryptocurrency exchange, Arab Chain found a persistent decrease to roughly 0.18, reflecting a clear sign of caution in the XRP market on Binance. It is worth noting that this position is one of the lowest levels recorded during the ongoing period, as the price of the token trades close to the $2.00 mark. Arab Chain highlighted that the drastic decline in the ELR suggests that investors ’ reliance on decrease is decreasing, meaning that most of the funded positions have been closed or limited. Structurally, a decline in leverage is seen as an indication of reduced market fragility. When this occurs, it lowers the likelihood of forced liquidations, which are caused by sudden price movements. As the market tends to lower risk and reset open positions, this behavior usually happens following times of increased volatility or price corrections. Interestingly, the drop is occurring along with a downward trend in XRP’s price compared to its previous levels above $3.00. This synchronicity is a sign that the accumulation of highly leveraged positions does not fuel the price decline. Rather, it is riven by the unwinding of such positions. In the past, environments like these typically marked transitional phases. During this period, the market transitions from active speculation to a calmer phase concentrated on rebalancing. A Stabilization To Kickstart A Rally Once the metric starts to stabilize again at a relatively low level, Arab Chain noted that it could lay the foundation for more substantial XRP price movements in the future. However, this is expected to happen once liquidity slowly returns to the derivatives market in the absence of excessive leverage. In other words, low leverage would make any future rally less likely to see a dramatic reversal. While the ELR sits at 0.18, the market is still reconstructing itself and creating a more balanced base prior to calculating its next major direction. Whether it resumes its upside direction or enters a prolonged consolidation phase depends heavily on the metric’s movement.

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