XRP price has been stuck at the $0.59 level since retreating from the $0.62 area on January 11th amid concerns about Ripple's partnership with the US government.
This week, a job listing posted on Ripple's website sparked negative sentiment across the XRP community. This fact was discovered after the applicants discovered a line that stated that the company was a “federal contractor or subcontractor” of the U.S. government.
A federal contractor is a company or organization that currently has a contract agreement with a department or agency of the U.S. government.
Ripple is no stranger to working with governments, having entered into multiple CBDC and payments partnerships with multiple countries in recent years. However, XRP's protracted SEC litigation over the past two years has caused a rift in the community's relationship with U.S. regulators.
Therefore, this statement affirming Ripple's partnership with the US government caused negative sentiment within the community.
XRP social sentiment falls to 2-year low
XRP price has been stagnant around $0.59 ever since the debate over Ripple's partnership with the US government spread throughout the community. However, looking beyond the price chart, trends in on-chain data reveal that the overall sentiment within the XRP ecosystem has turned negative.
Santiment's weighted sentiment metric measures the number of negative comments versus negative comments a project receives.
XRP weighted sentiment fell to negative value, hitting a two-year low of 1.58% on January 14th.
A negative value for weighted sentiment indicates that most discussions about the asset during that period are primarily negative. This timing means that XRP's current negative sentiment cycle may be due to investors expressing concerns about Ripple's relationship with the US government.
If this develops into larger market fear, uncertainty, and doubt (FUD), XRP price risks falling into a significant downtrend.
XRP traders closed $242 million worth of futures contracts
The decline in XRP open interest relative to the spot price over the past two weeks is another key market indicator highlighting the growing bearish pressure.
As shown below, XRP open interest decreased by 32% from $755 million to $513 million, losing $242 million in value from January 3rd to January 16th.
In comparison, the XRP spot price only fell 8% from $0.62 to the local low of $0.58.
Open interest quantifies the total capital invested in active futures contracts for a particular crypto asset. Uniquely, a decrease in open interest is considered a significant bearish signal. This shows the apathy of market participants as capital flows out of the market.
Current market trends show that the XRP derivatives market has contracted significantly faster than the price over the past two weeks. This could mean that XRP price is significantly overvalued in the spot market.
XRP Price Prediction: Will it rise again to $0.50?
From an on-chain perspective, the decline in open interest confirms the prevailing negative sentiment within the XRP ecosystem. Combining these factors could push XRP price closer to $0.50 territory in the short term.
The Parabolic SAR technical indicator also supports this XRP price prediction. A drop below the current price of an asset suggests that bearish momentum is prevailing.
The dot on the XRP Parabolic SAR indicator is pointing at $0.62 as of writing on January 16th, which is much higher than the current price of $0.57. This alignment strongly indicates that the bears are firmly in control.
However, to test this hypothesis, the bulls need to clear the first psychological support level at around $0.55. If they break through that buying wall, XRP price could slide towards $0.50.
On the other hand, if the bulls successfully rebound above $0.60, their predictions could be invalidated.
