XRP Faces Liquidity Crunch on Binance: Impact on Price

XRP has suffered a dip in trading activity on the world’s largest cryptocurrency exchange, Binance. As per a recent update shared by a chartist, Steph is Crypto, XRP’s 30-day liquidity index on Binance has dropped to 0.097 from over 3 points during the 2022-2024 trading cycles.

XRP whale activity could decide price direction

Notably, a sharp drop in the liquidity index signals thinner order books and leaves an asset’s price prone to volatility. That is, there are fewer buy and sell orders, and the market depth is thinner than in previous market cycles.

The continued volatility of XRP’s price has triggered caution among traders. This has left fewer participants in the market space that are actively trading the coin. This development places XRP in a pivotal position for a possible uptick in price.

Generally, when liquidity is high, large orders get absorbed easily, and price movement is slower and more gradual. However, with XRP’s liquidity index on Binance far below 1 point, a large buy order can quickly accommodate the existing sell order.

This can lead to a price spike, and XRP can witness a positive shift in price momentum. In order for this to happen, XRP whales need to step in and accumulate a large amount of XRP at the current reduced price. It is only then that the coin could rapidly gain in price.

On the flip side, if these large holders choose to sell, the price could crash faster than usual, as there is not much resistance in the order book.  

XRP price action and volume signal market caution

XRP has been in the red and down by 13.71% over the last 30 days. However, in the last 24 hours, the coin has moved from a daily low of $1.34 to a peak of $1.38. As of this writing, XRP exchanges hands at $1.37, which reflects a 1.68% increase within the time frame.

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Investors remain cautious, as signaled by the low trading volume of XRP. In the last 24 hours, volume has declined by 13.34% to $2.83 billion despite the light price uptick.

This is likely due to the on-chain activity on Binance within the last 72 hours. There have been 470 million XRP deposited on the exchange within this period, suggesting a possible sell-off move shaping up. If these large holders decide to dump on the market, XRP’s price could threaten the $1.15 support level.

A lot depends on the next move by whales and institutional holders. XRP could either climb or continue its downward momentum based on its action.