XRP Analysis: XRP Shorts on Bitfinex Have Doubled in Two Weeks. Could a Squeeze Follow?

A widely shared X post citing Bitfinex data shows margin shorts on XRP (CRYPTO: XRP) surged from about 148,850 to about 300,000 in less than two weeks. While we haven’t been able to verify these numbers directly with Bitfinex, the dramatic rise in bearish positions has sparked discussion of a potential XRP short squeeze.

XRP was trading at $1.28, reflecting a 13.7% decline in October and dipping below the key $1.30 mark. Early that morning, it fell to $1.27, pushing under the previous day’s low of $1.28. This raises the question: have short positions built up enough to trigger a squeeze, or are these investors accurately predicting the trend?

Bitfinex’s XRP Short Count Tracks Borrowed and Sold Coins

In simple terms, a margin short means a trader borrows XRP from the exchange, sells it at the current market price, and hopes to buy it back later at a lower price. The difference between the selling and buying prices represents the trader’s profit. Bitfinex provides ongoing totals for these positions across major cryptocurrencies, leading many crypto traders to monitor the numbers closely.

A crowded short position is like a tightly coiled spring. When prices start to rise, short sellers are forced to buy back XRP to close their positions—either to cut losses or because of margin calls from the exchange. This buying activity can drive prices even higher, potentially creating a feedback loop in which more shorts are forced to cover, pushing prices higher.

Many traders are interpreting the doubling of short positions as a positive signal, suggesting twice as many potential buyers are waiting just above the current price.

The Bitfinex XRP Short Book Could Be Worth About $384,000

If the 300,000 figure represents XRP tokens, the total value of the Bitfinex short positions would be about $384,000 at a price of $1.28. While this amount may seem substantial, it is relatively small for one of the most actively traded cryptocurrencies and likely not enough to cause a significant price change if these positions were closed.

On the other hand, if these figures refer to individual positions rather than tokens, the total dollar value remains uncertain, since single positions can vary widely in size.

Many shorts also serve as hedges. Traders holding XRP elsewhere or buying spot XRP while shorting it to profit from price differences are likely protected against losses if the price spikes. Consequently, a sudden price increase might not incentivize these traders to cover their shorts.

Moreover, Bitfinex is just one platform. A large portion of leveraged XRP trading occurs in perpetual futures on larger exchanges—contracts that mirror XRP’s price and don’t have expiry dates.

Therefore, figures that reflect the overall market could better capture crowded shorts, such as open interest (the total value of open contracts) and negative funding rates (fees shorts pay to maintain their positions). Bitfinex’s short count misses these factors and also overlooks spot buying on the XRP Ledger.

XRP Shorts Have Been Right as XRP Trails Bitcoin

The current short setup suggests these traders have accurately anticipated market movements. Over the past month, XRP has declined 16.2%, while Solana (CRYPTO: SOL), Ethereum (CRYPTO: ETH), and Bitcoin (CRYPTO: BTC) fell 12.7%, 11.6%, and 4.4%, respectively. Shorts are targeting the weakest major coin in this downward trend, pushing XRP back to where it stood in late 2024.

Historically, crowded short positions have led to sharp rallies in the cryptocurrency space. However, such squeezes typically require a catalyst, such as a major news event or a breakout above resistance levels. Without a trigger, a rising short count often simply means traders are adding to a profitable position.

XRP Must Overcome Key Resistance Levels to Trigger a Squeeze

Currently, XRP is trading below its 20-day moving average of $1.37 and its 50-day moving average of $1.41. A moving average is calculated from the average closing prices over a set number of days and often marks a key level where sellers emerge during a downtrend.

In October, sellers dominated this zone. Despite XRP reaching $1.40 on October 21—briefly surpassing the 20-day average—it ultimately closed at $1.36 before falling to $1.28 by October 23.

As a result, almost every short position opened since October 12 is currently in profit at $1.28, as XRP has traded higher on most days during this period. Traders with profitable shorts have little incentive to close.

For a squeeze to occur, fresh buying pressure must be significant enough to push XRP above its moving averages. This buying could come from large holders, trading funds, or a bounce-back in Bitcoin, which has outperformed XRP over the past month.

Is an XRP Short Squeeze Looming After the Bitfinex Build-Up?

At this moment, a short squeeze seems unlikely based solely on the current market setup. The short position figure remains unverified, its nature (tokens vs. positions) is ambiguous, and at first glance, it might represent a minor dollar amount on a single exchange. A crowded short typically needs an external trigger, and so far, XRP has shown no signs of one forming. Consequently, XRP holders might face a market where sellers maintain control until such a trigger materializes.

For XRP to regain traction, it would need to reclaim $1.37—around 7% higher than its current price—and subsequently break through the $1.41 resistance level.

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