Following a decline of 27.8 percent over the past quarter, XRP appears to have got stuck in the low $1 range – trading at $1.03 as of Friday. However, latest exchange data shows there might be some reasons for the bulls to be happy about, as XRP leverage heatmap indicates a reduction in risk of sharp liquidation swings.
XRP leverage showing improved health
According to recent data, the 30-day sum XRP leverage heatmap on Binance is showing a fall in potential liquidation volumes compared to the elevated levels seen in recent weeks.
Notably, the latest reading shows that the cumulative total of long liquidations over the past 30 days stands at approximately $47.7 million, while short liquidations total around $13.9 million.
As can be viewed in the above chart, long liquidations continue to exceed short liquidations, reflecting traders’ preference for leveraged long positions.
However, the overall trend of the heatmap points to a steady decline in liquidation volumes, following a steep peak in late June and also mid-July. This suggests that market risk has eased.
For the uninitiated, liquidation occurs when a leveraged trader’s position is forcibly closed by an exchange because losses have become large enough that their margin can no longer support the trade.
Long liquidations happen when prices fall and leveraged buyers are forced to sell. In clear contrast to this, short liquidations happen when prices rise, and leveraged sellers are forced to buy back their positions.
The fall in liquidation volumes hints that a big portion of highly leveraged positions has already been liquidated – or closed during previous periods of greater volatility – contributing to a more stable derivatives market.
Typically, lower liquidation volumes decrease the odds of sharp price swings driven by cascading liquidation events. Subsequently, they help in creating a more balanced market environment.
XRP long positions at greater risk
The prolonged dominance of long liquidations over short liquidations shows that the downside risk is more concentrated among leveraged long traders if XRP experiences an abrupt price decline.
The overall demand for XRP has been largely lacking, increasing the odds of an immediate price decline that not all holders may foresee.
That said, XRP whale inflows to exchanges like Binance have been on a downtrend as well, showing that large, sophisticated investors are choosing to hold XRP instead of liquidating their holdings.
