MKRUSD Maker

Key takeaways:

• The SEC’s decision on a spot XRP ETF could ignite a significant rally.

• The current $2.2 billion in XRP futures hints at growing institutional investor demand.

The two most bullish events ever imagined by XRP (XRP) advocates happened in 2025, but XRP continues to underperform the cryptocurrency market. On March 6, XRP was listed as a candidate for the United States' “Digital Asset Reserve,” and Ripple Labs settled a multi-year-long complaint with the US Securities and Exchange Commission on May 8.

XRP fell 6% in the three months leading up to May 22, while overall crypto market capitalization rose 10%. Traders remain hopeful for a 45% rally to $3.50, with derivatives metrics signaling rising confidence.

Leverage use ramps up ahead of potential spot XRP ETF listing

The aggregate open interest on XRP futures on major exchanges jumped to 923 million XRP on May 22, up 31% from two weeks prior. The $2.2 billion position in futures markets signals growing interest from traders, but it is not necessarily bullish, as those instruments can also be used to speculate on the XRP price downside.

Some traders argue that the increased demand for leveraged XRP positions indicates growing institutional interest, especially as multiple issuers filed for a spot XRP exchange-traded fund (ETF) listing in the US. However, the final decision by the US SEC should be made in October.

Excessive demand for bullish leveraged XRP causes a positive funding rate, meaning longs (buyers) are the ones paying the carry cost. As cryptocurrency traders are generally optimistic, a 7% to 14% annualized funding rate is expected in neutral markets, while periods of FOMO can push the indicator above 50%.

The annualized funding rate jumped to 19% on May 22, nearing the highest levels in six months. Still, the current optimism level is nowhere near the 100% annualized funding rate from Dec. 4, 2024, which followed an impressive 7-day rally to $2.90 from $1.33. Far from being bearish, the current level leaves room for bullish positioning on XRP futures markets.

Related: Which senators invest in crypto? 11 lawmakers have blockchain-related investments

Favorable regulation opens the door for new partnerships and acquisitions

Part of the limited XRP price upside can be explained by the multiple rejections of US Senator Cynthia Lummis, Chair of the US Congress Digital Assets Subcommittee, to meet Ripple representatives. Ripple CEO Brad Garlinghouse asked on May 19 that the lawmaker “reconsider and be a leader for ALL of crypto,” and discuss “how to make the US the crypto capital of the world.”

There is nothing stopping XRP from hitting $3.50 or even higher, as Ripple Labs is no longer facing direct threats from regulators, which paves the way for partnerships and acquisitions. Historically, XRP has reacted very positively following those announcements, and the $2.2 billion futures open interest could help catapult XRP price above the current $3.25 all-time high.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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