According to Cointelegraph, the potential approval of a spot XRP exchange-traded fund (ETF) by the U.S. Securities and Exchange Commission (SEC) could trigger a significant rally for XRP. Despite two major developments in 2025, including XRP's candidacy for the United States' “Digital Asset Reserve” and Ripple Labs' settlement with the SEC, XRP has underperformed compared to the broader cryptocurrency market. From March 6 to May 22, XRP's value declined by 6%, while the overall crypto market capitalization increased by 10%. Traders remain optimistic about a potential 45% rally to $3.50, supported by derivatives metrics indicating rising confidence.
The use of leverage in XRP futures has increased ahead of the potential spot XRP ETF listing. On May 22, the aggregate open interest on XRP futures across major exchanges surged to 923 million XRP, marking a 31% increase from two weeks earlier. This $2.2 billion position in futures markets reflects growing interest from traders, although it does not necessarily indicate a bullish sentiment, as these instruments can also be used to speculate on price declines. Some traders suggest that the heightened demand for leveraged XRP positions signals growing institutional interest, especially with multiple issuers filing for a spot XRP ETF listing in the U.S. The SEC's final decision is expected in October.
The increased demand for bullish leveraged XRP positions has resulted in a positive funding rate, where long positions (buyers) bear the carry cost. In neutral markets, cryptocurrency traders typically expect a 7% to 14% annualized funding rate, but periods of heightened optimism can push this indicator above 50%. On May 22, the annualized funding rate rose to 19%, approaching the highest levels in six months. Despite this, the current optimism level is far from the 100% annualized funding rate observed on December 4, 2024, following a significant rally. This leaves room for bullish positioning in XRP futures markets.
Favorable regulatory conditions have opened opportunities for new partnerships and acquisitions for Ripple Labs. The limited upside in XRP's price can be partly attributed to multiple rejections by U.S. Senator Cynthia Lummis, Chair of the U.S. Congress Digital Assets Subcommittee, to meet with Ripple representatives. Ripple CEO Brad Garlinghouse urged the lawmaker on May 19 to reconsider and lead the crypto industry in the U.S. With Ripple Labs no longer facing direct regulatory threats, the path is clear for potential partnerships and acquisitions. Historically, XRP has responded positively to such announcements, and the $2.2 billion futures open interest could propel XRP's price beyond its current all-time high of $3.25. This article is for informational purposes only and does not constitute legal or investment advice.
