XRP Short Sellers Tighten Grip—Will $2.05 Support Crumble Next?

XRP bulls are on the backfoot as short sellers double down, testing key support levels. The $2.05 threshold now hangs in the balance—a breakdown could trigger cascading liquidations.

Market sentiment turns cautious despite Ripple’s recent regulatory wins. Traders eyeing the next move: Will institutional inflows bail out the embattled token, or is this another ’decentralized’ asset at the mercy of hedge fund algos?

Funny how crypto’s ’hedge against traditional finance’ still dances to Wall Street’s short-term whims.

The moving average convergence divergence recently turned negative, suggesting that their downside momentum may be building. At 11, the average directional index, which gauges trend strength, is extremely low, indicating that there is currently only choppy sideways action rather than a strong trend. The majority of short- and medium-term moving averages are also flashing sell signals.

A big move might be on the horizon, as shown by the narrowing of the Bollinger Bands. The squeeze, however, occurs at the same time that XRP is testing support, which might suggest that a decline rather than a bounce is more likely. 

While short-term setup is bearish, XRP’s fundamentals are still solid. A major regulatory burden was recently lifted as Ripple resolved its legal dispute with the Securities and Exchange Commission. Additionally, there is increasing interest in a possible spot XRP exchange-traded fund, which Bloomberg analysts predict will be approved by the end of 2025 with an 85% chance.

ETF approvals could increase institutional demand and drive up prices considerably. Meanwhile, Ripple’s $4-5 billion offer to purchase stablecoin issuer Circle, although unsuccessful, shows the company’s ambitious growth goals. 

Macroeconomic challenges still exist though. Risk sentiment is being distorted by President Trump’s tariff policies and sticky inflation. The Federal Reserve’s May 7 interest rate decision and May 13 CPI data are also drawing attention the focus of attention because they have the potential to impact the movements of cryptocurrency assets, including XRP.

If XRP loses $2.05, it could fall toward $1.98–$2.00, where the 200-day support sits. Still, the bulls aren’t out. If XRP can bounce from this range and break back above $2.20, it might flip momentum back in its favor. But right now, the odds don’t support that move.