XRP falls sharply as leverage unwind and risk-off sentiment hit crypto markets

Adam

Summary:

XRP plunged as risk-off sentiment and leveraged long liquidations accelerated selling, with weak institutional support and broken technical levels reinforcing a bearish outlook toward the $1.42–$1.35 support zone.

XRP falls out of bed

Since the beginning of 2026, XRP has grappled with intensified volatility, culminating in a sharp sell-off that has underscored the token’s sensitivity to macroeconomic pressures, leveraged positioning and evolving investor sentiment.

While XRP’s longer-term narrative - driven by adoption in cross-border payments and ongoing institutional interest - remains a touchstone for many holders, recent price action has been dominated by short-term dynamics that have amplified downside risk.

In the early weeks of the year, XRP had shown signs of tentative resilience. Following a recovery from late-2025 lows, the token had traded in a choppy but relatively stable range, bolstered by optimism around potential spot XRP exchange-traded products (ETPs) and signs of regulatory clarity in certain jurisdictions. These narratives helped underpin sentiment and encouraged longer-term investors to hold through bouts of market stress. However, this stability masked underlying vulnerabilities that emerged as broader financial conditions shifted.

The catalyst for the recent sell-off was rooted in a renewed risk-off rotation across cryptocurrencies. XRP, with its high-beta characteristics relative to established assets like Bitcoin, experienced disproportionate pressure as traders reduced leveraged positions and sought safer havens or liquid collateral.

Leverage dynamics played a significant role in intensifying the decline. In the weeks leading up to the downturn, derivatives data indicated that speculative long exposure in XRP had rebuilt as market participants positioned for continued momentum.

When prices failed to extend higher and instead breached key technical support levels, stop-loss orders were triggered and liquidations accelerated. The forced unwinding of leveraged longs drove selling pressure beyond what spot market orders alone would have produced, creating a feedback loop that pushed XRP sharply lower.

Institutional flows also reflected the shift in sentiment. Early 2026 had seen pauses in both inflows and outflows from XRP-linked investment products, suggesting selective allocation rather than broad conviction.

During the current sell-off, the absence of aggressive institutional dip-buying - particularly from larger asset managers - left XRP vulnerable to sustained downside pressure. In contrast to other asset classes where institutional players have sometimes acted as stabilising forces, capital flows in and out of XRP structures appeared cautious and tactical, reinforcing volatility rather than dampening it.

Sentiment specific to the XRP ecosystem contributed to the sharp move. While discussions about regulatory clarity and ETP access continue, tangible progress has been incremental rather than transformational. In the absence of clear, immediate catalysts for adoption or product launches, traders focused more heavily on macro indicators and short-term technical levels. This dynamic contributed to a lack of conviction at key price supports, making it easier for stop-losses to cascade and deepen the sell-off.

Looking ahead, XRP’s direction will likely hinge on whether broader market conditions continue to improve and whether institutional and retail confidence can rebuild without renewed liquidation pressure.

For now, the current sharp sell-off serves as a reminder that even assets with strong structural narratives remain vulnerable to shifts in sentiment, leverage unwinds and tactical positioning.

XRP bearish case:

While XRP remains below its late January low at $1.5082 on a daily chart closing basis, immediate downside pressure should remain dominant with the $1.4168 - $1.3495 support zone being eyed. It consists of the September-to-November 2021 highs and the 2025 trough.

Failure there may push the May 2021 low at $1.1008 to the fore.

XRP bullish case:

There currently is none! Only if XRP were to see a bullish reversal which would take the cryptocurrency above its $1.5082 late January low on a daily chart closing basis, could the early February high at $1.6778 be back on the map.

Short-term outlook:

Bearish while below the 31 January high at $1.5082, targeting the $1.4168 - $1.3495 region.

Medium-term outlook:

Bearish, targeting the $1.4168 - $1.3495 support area while below $1.5082.

XRP daily candlestick chart

Source: ig

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