XRP investors witnessed two of the most anticipated bullish events unfold in early 2025, yet the price of XRP has continued to underperform the broader cryptocurrency market. Despite these positive catalysts, XRP declined by 6% over the three months leading up to May 22, while the total crypto market capitalization increased by 10% during the same period.
This article explores the key factors behind this divergence, examining market sentiment, derivatives activity, and regulatory developments. We also assess whether current conditions still support the optimistic price targets many traders are anticipating.
Key Market Indicators and Institutional Interest
The total open interest in XRP futures across major exchanges surged to 923 million XRP on May 22, representing a 31% increase from just two weeks prior. This $2.2 billion in futures positions indicates a significant rise in trader interest, though it's important to note that these instruments can be used for both long and short strategies.
Leverage Demand and Funding Rates
The increased demand for leveraged XRP positions has pushed the annualized funding rate into positive territory. As of May 22, this rate reached 19%, nearing its highest level in six months. Positive funding rates mean that long position holders (buyers) are paying fees to short sellers, indicating bullish sentiment among derivatives traders.
While this 19% rate suggests optimism, it remains well below the extreme level of 100% recorded on December 4, 2024, when XRP's price surged from $1.33 to $2.90 within just seven days. The current moderate level suggests there's still room for increased bullish positioning without entering overbought territory.
Regulatory Developments and Their Market Impact
Two significant regulatory developments occurred in early 2025 that were expected to boost XRP's price:
1. Digital Asset Reserve Status Consideration
On March 6, XRP was included on the U.S. shortlist for consideration as a "digital asset reserve," potentially increasing its institutional adoption prospects.
2. SEC Lawsuit Resolution
On May 8, Ripple Labs reached a settlement with the U.S. Securities and Exchange Commission (SEC), concluding years of litigation that had created uncertainty around XRP's regulatory status.
Despite these positive developments, the price response has been muted compared to expectations. This suggests that other factors may be counterbalancing these bullish catalysts.
Political Hurdles and Regulatory Engagement
One potential factor limiting XRP's upward momentum involves political challenges. U.S. Senator Cynthia Lummis, who chairs the Senate Banking Subcommittee on Digital Assets, has repeatedly declined meeting requests from Ripple representatives.
Ripple CEO Brad Garlinghouse publicly urged the senator on May 19 to "reconsider and become a leader for all crypto," emphasizing the importance of discussing "how to make the U.S. the crypto capital of the world." This political hesitation creates uncertainty about the regulatory environment despite the settled lawsuit.
Price Outlook and Market Psychology
Many traders maintain confidence that XRP could still achieve a 45% price increase to reach $3.50. Historical patterns show that XRP has typically responded positively to partnership and acquisition announcements, and with the regulatory threat diminished, Ripple Labs now has more flexibility to pursue such growth strategies.
The current $2.2 billion in futures open interest could potentially provide the momentum needed for XRP to break through its all-time high of $3.25, though market timing remains uncertain. For those tracking these developments, monitoring real-time market data can provide valuable insights into emerging trends.
Frequently Asked Questions
Why hasn't XRP price increased after the positive regulatory developments?
Market prices often anticipate positive news before it officially occurs, a phenomenon known as "buy the rumor, sell the news." Additionally, broader market conditions and specific political challenges have partially offset the positive impact of these developments.
What does the high open interest in XRP futures indicate?
High open interest indicates increased trading activity and market participation. While it often precedes significant price movements, it doesn't necessarily predict the direction. The current levels suggest strong institutional interest but could support either bullish or bearish scenarios.
How important is the potential XRP ETF approval?
The approval of a spot XRP ETF would be significantly bullish as it would provide easy access for institutional investors. Multiple firms have filed applications, with the SEC's decision expected around October 2025. This could potentially trigger substantial price appreciation.
What are the main obstacles for XRP price growth currently?
The primary obstacles include political resistance to engaging with crypto companies, competition from other digital assets, and general market sentiment. Despite resolved regulatory issues, these factors continue to influence price action.
Could XRP still reach its previous all-time high?
Yes, many analysts believe the fundamentals support a push beyond the previous $3.25 high. The settled lawsuit, potential ETF approval, and growing institutional interest create a favorable environment for long-term appreciation.
How does XRP's performance compare to the broader crypto market?
XRP has underperformed the general crypto market recently, declining 6% over three months while the total market cap gained 10%. This divergence suggests that XRP-specific factors are outweighing broader market trends.