XRP Faces Liquidation Cascade Below $2 as Market Realigns

XRP is trading under significant pressure, currently at $1.46 with daily gains of 24.23%, yet structurally positioned below the critical $2 threshold that has repeatedly triggered liquidation events. The broader digital asset market has also shifted into correction mode, but XRP’s weakness reveals deeper forces reshaping the landscape—particularly large-scale forced position exits that are creating both near-term selling pressure and longer-term technical opportunities.

The $2 Price Level: Where Liquidations Meet Psychology

The $2 barrier represents far more than a round number for XRP. Early January saw the token surge past this level, peaking near $2.14 before momentum collapsed. By mid-January, XRP had retreated to $1.92—a pullback accompanied by approximately $40 million in forced liquidations as leveraged traders faced margin calls. That specific price movement was not accidental; it coincided precisely with liquidation cascades that wiped out overleveraged positions.

According to blockchain analytics firm Glassnode, XRP holders have shown extreme sensitivity to the $2 level throughout early 2025. Every time the price has tested $2, subsequent realized losses have ranged from $500 million to $1.2 billion weekly. This pattern suggests that $2 is not merely a price point—it functions as a liquidation trigger zone where forced selling accelerates losses and creates feedback loops.

Comparing to February 2022: The Liquidation Pattern Repeats

Glassnode has identified striking similarities between current market conditions and the structure that existed in February 2022, when liquidations also dominated price action. The parallel lies in holder behavior: short-term traders (one-week to one-month time horizon) are currently accumulating XRP below the cost basis of longer-term holders (six-to-twelve-month range). This dynamic creates asymmetric pressure—newer buyers have lower entry points while existing holders are “underwater,” creating incentives for stressed liquidations of older positions.

As this accumulation pattern continues, the cost-basis mismatch builds pressure on those who entered at higher levels. They face ongoing mark-to-market losses, making forced exits more likely if liquidation cascades accelerate further.

Liquidation Heatmaps: Reading Where Prices Are Forced

Market technicians studying liquidation heatmaps—charts showing where leveraged long and short positions concentrate—reveal the mechanical forces driving recent price swings. These maps identify zones where forced liquidations create predictable selling or buying pressure. Prices typically accelerate away from low-liquidity areas and toward dense clusters of liquidation stops.

In the most recent trading sessions, the long liquidation cascade cleared out overleveraged bullish positions as prices declined, temporarily reducing immediate downside pressure. However, the technical picture inverts at higher price levels. Analysts note substantial short position concentrations above current prices, meaning any upward move could trigger a reverse liquidation squeeze—forced short covering that could fuel sharper rallies.

ETF Flows Offer a Counterweight to Liquidation Pressure

Despite the liquidation challenges, XRP-linked exchange-traded products have attracted consistent capital since their November 2025 launch. Cumulative net inflows now exceed $1.28 billion, with consecutive positive flows reported and zero outflows recorded to date. This institutional demand provides a structural bid beneath the market, suggesting that large players are buying weakness rather than joining the liquidation panic.

The interplay between liquidations and ETF flows reveals the market’s true positioning: retail and leveraged traders are being flushed out through forced exits, while institutional capital is repositioning for longer-term exposure. This separation typically precedes trend reversals, as the weak hands exit via liquidations while the strong hands accumulate at lower valuations.

Market Repositioning vs. Capitulation

While downside pressure remains present for now, the combination of visible liquidation events, shifting holder composition, and sustained ETF demand suggests the market is actively reallocating capital rather than entering outright capitulation. The liquidation heatmaps show clear structural levels; the ETF flows show institutional conviction. Neither force alone determines the outcome, but their interaction—liquidations clearing out weak longs while ETF buyers absorb supply—indicates a market finding its equilibrium through forced price discovery rather than organic selling pressure.