After reaching a new all-time high of $1.76B on July 17 on Binance, XRP open interest began to decline sharply.
This contraction in the derivatives market was accompanied by a significant price correction, with XRP falling from $3.55 to $1.83, representing a drawdown of nearly 50%.
As positions were liquidated or voluntarily closed, open interest on Binance continued to decrease, recently dropping below the $500M threshold.
This level had now persisted since the exceptional liquidation event that occurred on October 10.
Overall, XRP open interest has declined by nearly 60%, highlighting a substantial destruction of liquidity in the derivatives market especially since the 10/10 event. It is also important to note that the decline in XRP’s price mechanically weighs on open interest, amplifying the contraction as prices move lower.
Taking a step back, these deleveraging phases play a crucial role.
They help flush out excess leverage built up in the market and restore a healthier market structure. Such periods are highlighted when XRP open interest on Binance falls below its semi-annual average.
Historically, these cleanup phases have often been followed by a bullish recovery, once investor interest gradually returns to the derivatives market.
Written by Darkfost
