- XRP’s Binance Scarcity Index has climbed to its highest level in more than two years as exchange reserves continue shrinking.
- Around 650 million XRP have left Binance since late 2024, reducing potential sell-side pressure.
- Analysts say the next major test sits at $1.20, where a breakout could trigger a stronger recovery.
XRP is showing a subtle but potentially important shift beneath the surface.
While the token continues trading near $1.13, one closely watched on-chain indicator suggests the amount of XRP available for sale on Binance is steadily declining. At the same time, derivatives traders appear to have flipped their positioning after a wave of short liquidations helped fuel the latest rebound.
Together, those signals are giving bulls something to watch, even if confirmation is still needed.
Binance Scarcity Index Climbs to a Multi-Year High
According to CryptoQuant analyst ArabxChain, XRP’s Binance Scarcity Index has risen to roughly 0.77, its highest reading in over two years.
The indicator measures how scarce XRP has become on Binance compared with historical levels. Simply put, a higher reading generally means fewer coins are sitting on the exchange ready to be sold.
That’s often viewed as a constructive signal because lower exchange balances can reduce immediate selling pressure if demand begins increasing.
The current setup looks very different from late 2024.
Back in December, the scarcity index dropped sharply as investors transferred large amounts of XRP onto Binance to lock in profits during the rally toward $3. Today’s trend appears to be the opposite, with holders steadily moving coins off the exchange instead.
Binance Reserves Continue Falling
Exchange reserve data reinforces that picture.
CryptoQuant data shows Binance held roughly 3.27 billion XRP in November 2024. Today, that figure has fallen to around 2.6 billion XRP.
That’s a reduction of approximately 650 million coins, or about 20% of the exchange’s reserves.
Interestingly, withdrawals appear to have accelerated over the past few months.
Between May and early July alone, Binance’s XRP holdings declined from roughly 2.8 billion to 2.6 billion coins, coinciding with the breakout in the Binance Scarcity Index.
There was one noticeable spike earlier this year when reserves briefly dropped before quickly recovering by around 350 million XRP. Analysts believe that move likely reflected internal wallet transfers rather than actual buying or selling activity.
Short Sellers May Have Fueled the Latest Rally
Shrinking exchange balances alone don’t move prices.
Demand still matters, and recent derivatives data suggests market positioning has changed considerably over the past several weeks.
According to CoinGlass, XRP funding rates remained mostly positive throughout May despite the token falling from above $1.45. During that period, bullish traders continued paying funding while the market kept moving lower.
That changed toward the end of June.
As XRP approached the $1 support level, funding rates flipped sharply negative. The most aggressive bearish positioning appeared between June 26 and June 28, just as XRP reached its local lows.
In other words, short sellers became increasingly confident precisely as the market approached one of its strongest support zones.
That positioning created the conditions for a short squeeze.
The rebound back toward $1.13 appears to have been driven, at least in part, by bearish traders closing positions rather than a major wave of fresh spot buying. Since early July, funding rates have returned to slightly positive territory, suggesting the market has largely reset without reaching overly bullish conditions.
The $1.20 Level Could Decide XRP’s Next Move
From a technical perspective, XRP is approaching an important crossroads.
After falling from above $1.55 earlier this year, the token found support between $1.00 and $1.04 before staging its recent recovery. Over the past week, XRP has gained roughly 8.6%, bringing it back toward the first major resistance area.
That resistance sits near $1.20.
A decisive daily close above that level could open the path toward the next supply zone between $1.35 and $1.40, representing roughly a 20% move from current prices.
Momentum indicators still leave room for further gains. The daily Relative Strength Index remains around the mid-50s, suggesting XRP hasn’t yet entered overbought territory.
Bulls Still Need Stronger Buying Volume
Despite the encouraging on-chain data, one concern hasn’t disappeared.
Trading volume has gradually declined throughout the recent recovery, indicating that spot buyers haven’t fully embraced the rally yet.
Still, there are signs that demand could be strengthening elsewhere.
Recent trading activity saw XRP briefly surpass Bitcoin in volume on South Korea’s Upbit exchange, while seasonal market trends have historically favored XRP during this period of the year.
For now, the bullish case remains straightforward.
Shrinking Binance reserves and rising scarcity are reducing potential selling pressure, while derivatives positioning has largely reset following the recent short squeeze. But unless XRP can reclaim the $1.20 resistance with convincing buying volume, the recovery remains incomplete.
If the token loses the critical $1 support area again, the current bullish structure would likely break down and put lower price levels back into focus.
