As XRP enters February under the influence of selling pressure, it continues to tread water in a decline that has lasted for over a month. The recent sharp pullback has further strengthened the bearish sentiment among investors and has led to increased pressure in both the spot market and related investment products.
This weakness has also reflected in XRP's dedicated cryptocurrency exchange-traded funds (ETFs): The volatility in fund inflows and outflows indicates that investors are being cautious. However, when delving deeper, some signs of stability have begun to emerge. Depending on these signs, will the XRP price continue its decline or recover; the answer may be hidden here.
XRP ETFs Still Have Not Performed Better
Despite the positive close for spot XRP ETFs for the week, a total net outflow of $404,690 occurred on Monday. On Friday, however, there was an inflow of $16.79 million into the funds. However, this return seen at the beginning of the week indicates that the selling pressure in the market has come back to the agenda.
This change indicates that the bearish movement has not completely disappeared yet. Because on Thursday, January 29, the largest outflow since the launch was seen from XRP ETFs at $92.92 million. While there was a general crash in the market during that session, the XRP price also decreased by 9%.
The stabilization of fund flows is essential for restoring market confidence. This stands out as a key requirement for a recovery in XRP price. However, overall investor sentiment remains quite fragile, and doubts about a sustained recovery continue to pressure investor expectations.
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On-chain data reveals that short-term investors are facing significant unrealized losses. The STH Net Unrealized Profit and Loss indicator is currently at -0.38. This value represents the highest loss level since July 2022 and the peak of the last three and a half years. This situation indicates that a significant portion of the last XRP buyers has given up.
Although it seems negative, this increase in STH losses may alleviate selling pressure in the short term. Historically, short-term investors tend to sell when they see profits. However, as losses grow, the motivation to sell weakens.
This dynamic may temporarily reduce the sellable XRP supply. Thus, if demand increases, there may be room for stability and recovery in price.
At the time of writing this article, the XRP price is around $1.62 and is moving below the resistance zone of $1.70. The altcoin has been in a consistent downtrend since the beginning of the year. The 16% loss experienced last week further strengthened the bearish technical structure, keeping XRP below significant moving averages and constraining its upward momentum.
However, there are two important factors that highlight the possibility of a recovery in the short term. First, it seems that the losses of short-term investors have reached a saturation level, which reduces the risk of selling. Second, technical indicators show that XRP is oversold and may open the door for a technical rebound towards $1.79.
The Money Flow Index (MFI) is currently hovering very close to the oversold zone. If it clearly falls below this level, a strong reversal usually occurs. In a similar situation before, XRP experienced a 14% increase within two days. If broader market conditions support it, the same scenario may come up again in this recovery attempt.
However, if upward momentum cannot be established, downside risk remains. If a close below $1.70 occurs, XRP may face selling pressure again. In such a scenario, it is possible for the price to decline to $1.54 or even $1.47. Losing these support levels would invalidate the bullish scenario and deepen the current decline.