XRP price drops 10% as $40M gets liquidated – Is a rebound next?

One thing stands out in the recent market setback caused by the CLARITY Act news.

While the overall market environment saw a significant breakdown with high-cap assets rejecting crucial support levels, XRP was one of the hardest-hit assets, closing the day down nearly 10% with the lowest wick retreating to $1.27. This marks the first time XRP has retested this level in over a month.

However, the timing of the move may be the critical factor in assessing whether it is a healthy deleveraging or a trend reversal move. As observed in the chart below, XRP’s 10% correction came on the heels of the asset trading around the $1.50 level, a critical resistance zone.

So, the inability to clear this level suggests that the recent decline may be a technical rejection exacerbated by the overall market weakness. It does not, however, confirm a trend reversal for XRP.

Supporting this trend, leveraged positions were massively liquidated during the last 24 hours.

According to CoinGlass data, $40 million worth of XRP positions were liquidated, with over 95% of them being long positions. Said amount represents the strongest long liquidation since the 22nd of August. The amount of liquidated long positions indicates that leveraged longs were significantly affected by the short-term price action, as they had to close their positions in order to offset their losses.

Usually, when strong underlying demand remains intact while excess leverage is flushed out, the market can enter a healthier setup for another attempt at breaking resistance. Interestingly, Ripple’s [XRP] current setup does not look too far from this scenario.

XRP’s breakdown meets strong on-chain demand

In a post on X, Ripple has shared its position on the recent CLARITY Act setback.

Meanwhile, Ripple is back in the spotlight following its investment in Velocity’s recent $10 million funding round. Velocity is a stablecoin startup, focused on bridging TradFi and DeFi by using stablecoins as a settlement layer for cross-border payments. With this investment, Ripple is clearly doubling down on the stablecoin arena. Despite the recent regulatory setback, Ripple is keeping its focus on the Web3 infrastructure.

According to AMBCrypto, this is where the chart below becomes important. It reports 85 new addresses accumulating over one million XRP that appeared two days before XRP’s 67% move out between the 17th and 21st of August.

Significantly, the pattern still enjoys fundamental support. Ripple’s endorsement of an RLUSD credit fund, coupled with its investments in tokenization, is enhancing the XRP Ledger’s utility.

Against this backdrop, Ripple’s response looks strategic.

Although XRP declined by 10%, the company is still growing through its Velocity investment, and smart money is clearly supporting these moves. In this context, Ripple’s latest X post clearly serves to bolster long-term confidence. This gives whales more reasons to HOLD through the FUD.

In turn, this makes XRP’s correction look bullish rather than bearish. The logic is simple: In addition to the general market deleveraging, the move also highlights that the market continues to see Ripple as a primary beneficiary of regulatory clarity, further strengthening the long-term outlook for XRP.

Final Summary

• XRP’s 10% drop looks more like a healthy correction than a trend reversal.
• Whale buying and Ripple’s continued growth keep the long-term XRP outlook supported.