The cryptocurrency market has faced significant challenges as Ripple’s XRP retraced almost 70% from its peak in 2025. This downturn has not been a sudden collapse; rather, it has been marked by gradual deterioration in market structure, characterized by lower highs and shortened rebounds. As liquidity in the market thinned, elevated leveraged positioning created a fragile foundation under the price of XRP. The breaking of key support levels triggered stop-loss orders, leading to a surge in derivative liquidations.
The results were dramatic, with realized losses spiking to approximately $908 million, marking the largest capitulation event since the downturn of 2022. This spike in losses signaled forced selling by distressed holders rather than voluntary exits, which coincided with a decline in open interest as leverage was flushed from the market. While short-term traders reacted to the turbulent conditions by reducing their exposure, larger wallets began to absorb the panic-driven liquidity. Despite a general decline in social sentiment, the activity from whales helped to moderate the extent of further declines.
Historically, the crypto market has shown a capacity for recovery following significant capitulations. For instance, a prior event in 2022 saw realized losses peak at around $1.93 billion, ultimately leading to a 114% recovery over the following months. This historical context raises the question of whether XRP can replicate similar recovery dynamics this time around.
In early 2022, XRP experienced an extreme selling spree that culminated in an 80% drop, before staging a substantial rebound. Currently, XRP is down roughly 70% from its 2025 highs of $3.65, sitting at approximately $1.10. Notably, the magnitude of realized losses has increased again, yet the overall market value has not contracted as sharply as it did in 2022. Furthermore, reduced 30-day volatility indicates a more stable market environment.
Several factors differentiate the current cycle from previous ones. Increased exchange-traded fund (ETF) participation, clearer regulatory frameworks, and enhanced derivatives activity now significantly influence liquidity dynamics. This institutional involvement may alter the speed or scale of any potential rebound.
XRP’s decline in February unfolded in a staged manner, beginning with a sharp 24% drop to $1.37, which intensified selling pressure. This decline pushed realized losses upward, exacerbating emotional capitulation among traders. However, a notable influx of approximately 3.8 billion coins from XRP whales to Binance reflects consistent deposits into exchanges, even as exchange reserves have plummeted to five-year lows. This migration has contributed to a reduction in immediate supply, easing some of the reflexive selling pressure.
Meanwhile, institutional activity has strengthened, with weekly spot ETF inflows reaching 12.6 million XRP, quietly absorbing distressed supplies from the market. Despite these positive signals, bearish sentiment remains strong, as funding rates have stayed negative for twelve consecutive days, reflecting persistent pessimism. The Fear and Greed Index dropped to a mere 9, indicating extreme fear among investors. Historically, such conditions often correlate with late-stage capitulation, suggesting that further restructuring could pave the way for accumulation, provided liquidity stabilizes.
The evolving dynamics of distressed supply and decreasing loss intensity hint at a potential late-stage capitulation rather than new structural weaknesses in the market. With compressed volatility and institutional absorption, XRP could be entering an early bottoming phase, marking a potential turning point in its price journey.
