XRP short positions swell, raising short squeeze potential

An analysis suggests that a rapid increase in short positions in the XRP perpetual futures market is heightening the risk of a short squeeze and a temporary price rebound. The Crypto Basic reported, citing data from CryptoQuant, that XRP open interest on Binance grew by approximately $15 million on March 9. Over the same period, the perpetual futures Cumulative Volume Delta (CVD) remained negative at -$2.75 billion, indicating a prevalence of sellers in the derivatives market. This signifies that short positions are increasing relative to long positions. When open interest rises while the CVD stays negative, the likelihood of a short squeeze or a price rebound can increase, even amid strong selling pressure. This pattern emerges as traders, betting on a price decline, continuously place market sell orders. If the market becomes overly crowded with short positions, even a minor halt in the price decline or a slight rebound could trigger a cascade of short liquidations, creating strong buying pressure. However, the outlet noted that the original downward trend could resume after any short-term surge or liquidation-driven rally.