XRP Plunges into ’Extreme Fear’ as Bears Dominate Post-January 5 Highs

Fear grips the XRP market. Investor sentiment has nosedived into 'Extreme Fear' territory, a stark reversal from the optimism that fueled its January 5 peak. The bears are firmly in control.

The Sentiment Shift

This isn't just a minor pullback—it's a full-blown sentiment crash. The metrics tracking market fear and greed have swung violently, painting a picture of a community bracing for impact. The euphoria of early January feels like a distant memory, replaced by cautious whispers and stop-loss triggers.

Behind the Bearish Turn

What flipped the script? A classic cocktail of profit-taking and renewed regulatory uncertainty. After that January 5 high, traders locked in gains, creating selling pressure that snowballed. Combine that with the ever-present shadow of legal headlines—the kind that make traditional finance lawyers bill extra hours—and you've got a recipe for a sentiment freeze.

Navigating the Fear Zone

History shows 'Extreme Fear' can be a contrarian signal, a potential buying opportunity when everyone else is hitting sell. But it also warns of high volatility and potential further downside. For now, the market's psychology has shifted from 'when moon' to 'how low'.

This swing from high to fear highlights crypto's emotional whiplash—where a single-digit percentage drop can erase weeks of bullish chatter faster than a hedge fund can say 'risk-off.' The only thing more volatile than the price might be the crowd's mood.

XRP falls 7% in a week; negative sentiment could help it recover

On Santiment’s FUD against price chart for XRP, sentiment briefly dipped into fear territory on January 2, the token traded near $1.85, shortly before prices rebounded above $2.00. By January 7, social Optimism had spiked into a greed zone off of an XRP rally to $2.30, which later proved to be a local top. 

The same pattern was visible on January 11 and January 13, when sentiment jumped into greed again while prices hovered between $2.20 and $2.35, a period that preceded holders dropping their positions.

Before this business week began, sentiment flipped to deep fear, sending XRP down to $1.90, one of the lowest sentiment readings of the month. A further dip on January 20–21 saw fear intensify, while price action stabilized NEAR the $1.85–$1.88 range. 

Santiment noted that historically, such extremes in bearish commentary have preceded relief rallies since the market moves in the opposite direction of retail’s expectations.

However, one user on X believes the market environment is now much different from what it was in previous cycles, rendering the analysis useless. 

“So you’re following some charts from years ago when literally everything has changed. Since that time, the SEC lawsuit is over, and ETFs are launching. Partnerships are in place. Can we throw out this theory completely? None of this matters. all new territory,” the critic surmised.

XRP’s decline spells a flush into its $1.88 support level, and the token is consolidating within descending and symmetrical triangle formations in the last three months. The pullback has held Ripple’s token back from walking past the support trendline that has guided the price since late 2024. 

According to some market watchers, as long as the token holds above the $1.90 support level, the bias WOULD remain cautiously bullish. That said, a descending resistance trendline overhead, coupled with a consolidation range around $2.05–$2.15, has capped any upside movement.

XRP is currently trading about 49% below its all-time high set in July, which followed an extraordinary rally of more than 600% from November 2024. Yet, negative sentiment peaked after a 50%+ downtick from the cycle top, per Santiment Feed’s analysis.  

XRP funding rates flashing negatives

CryptoQuant’s Binance Funding data shows rates have been mostly in the negative since December. This suggests traders are betting against XRP, even as the market assumes a significant downside is behind the token’s past.

While the accumulation of short positions can amplify near-term selling pressure, it also builds latent buying pressure through liquidations. Analyst Darkfost explained that in the event of a price uptick, liquidations from short sellers would boost its upward momentum. 

The pattern played out twice since 2024, during the August–September 2024 period and again in the April 2025 correction, when negative funding preceded rebounds. On the XRP/USDT pair, the recent rejection from the $2.00 resistance block coincided with the price failing to reclaim the declining 100-day and 200-day moving averages. 

The daily relative strength index has fallen from overbought levels and now sits below the neutral 50 level, which could signal that momentum has flipped from short covering to negativity. 

Bulls are also excited about Ripple’s US dollar-backed stablecoin’s listing for spot trading on Binance. The listing will initially feature trading pairs XRP/RLUSD and RLUSD/USDT on launch. Binance will also add portfolio margin eligibility for RLUSD and plans to include the stablecoin in Binance Earn products to expand user yield-generation options.

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