The price of XRP has recently retraced into the low-$2 range following a remarkable rally in 2025. Despite this pullback, there are indications that bearish sentiment may not fully reflect the underlying market dynamics, hinting at new buying pressure. In late January 2026, XRP fell below $2, representing a decline of approximately 19% from its peak on January 5. Nonetheless, on-chain analytics suggest that sellers could face unexpected challenges.
A key indicator of this hidden demand is the significant shift in funding rates for XRP perpetual futures, which have turned sharply negative. This phenomenon frequently serves as a warning sign for short sellers who may be on the verge of being squeezed. According to CryptoQuant, similar patterns of negative funding rates were observed in August-September 2024 and again in April 2025, each time preceding notable rebounds in XRP prices.
The accumulation of leveraged short positions potentially creates “latent buying pressure” that could fuel the next upswing. Concurrently, social media sentiment for XRP has dipped into an “extreme fear” zone, which historically acts as a contrarian buy signal. This sentiment shift raises the question: can XRP replicate its 2025 rally, or will the optimism of bulls dwindle?
Analysts have pointed out that the negative funding rates on XRP perpetual futures indicate a crowded market of bearish bets. When funding rates are negative, it means that short sellers are paying long holders, which often correlates with market reversals. Darkfost, an on-chain strategist, noted that XRP“s funding rate turned negative in late 2025, echoing similar trends from the previous year that preceded upward price movements.
Retail traders appear to be increasingly nervous, as evidenced by data from Santiment, which shows that XRP has entered an “Extreme Fear” phase following its recent decline. This level of pessimism has historically marked local price bottoms. According to Santiment, extreme negativity among retail traders often leads to price rallies, as markets frequently move in the opposite direction of retail expectations.
On the institutional front, there has been a notable increase in demand as four new U.S. XRP exchange-traded funds (ETFs) have seen substantial inflows, totaling approximately $1.37 billion since their launch in late 2025, with no recorded net outflows. This demand persists despite a significant decrease in XRP balances on exchanges, with CryptoQuant reporting that Binance“s reserves have hit a two-year low. Additionally, data from CoinGlass reveals a roughly 45% reduction in XRP holdings on Binance over the past year.
Institutional investors and long-term holders are accumulating XRP, contributing to thinning sell-side liquidity on exchanges. Furthermore, network usage has increased, with daily transactions on the XRP Ledger surging over 50% in mid-January, nearing one million transactions, indicating real-world adoption and activity.
Looking ahead, analysts provide varying price predictions for XRP through the end of 2026. Ali Martinez identifies $1.78 as a critical support level, noting that the price has bounced off this mark. The immediate resistance level lies between $1.97 and $2.00, which has historically limited upward movements. If XRP breaks above $2.00, it could pave the way for a rise towards $2.40-$2.60.
Long-term forecasts show a positive outlook, with some analysts projecting XRP could reach $8.00 by late 2026, assuming sustained ETF inflows. More conservative estimates cluster around $2.50-$3.00, with potential peaks near $4-$5 under moderate growth scenarios. The consensus across various platforms suggests that XRP could trade between approximately $2.7 and $8.6 by the end of 2026, averaging around $3.9.
In summary, the current market dynamics for XRP indicate a mix of bearish sentiment and hidden demand that could potentially lead to a significant price rally, reminiscent of its performance in 2025.
