XRP price is up about 2% in the past 24 hours. This small move is part of a broader rebound of nearly 6% after XRP briefly broke below a critical support level. Yes, a breakdown.

That breakdown initially confirmed a bearish head-and-shoulders pattern, which projected a steep 20% decline. But the story did not end there. Instead of accelerating lower, XRP rebounded quickly. New data now shows this breakdown may have served as bearish bait, drawing in short sellers before reversing.

XRP’s 20% Bearish Breakdown Created the Perfect Trap Setup

The bearish pattern began forming on the 8-hour chart on February 6. XRP created a head-and-shoulders pattern. It is one of the most widely watched bearish reversal patterns. The key level in this pattern is the neckline. For XRP, this support sat near $1.33.

When the XRP Ledger token broke below this level on February 24, it confirmed the bearish structure. Based on the height of the pattern, the projected downside target was about 20%. At the same time, another warning appeared, confirming the breakdown.

On-Balance Volume (OBV) was declining even as the XRP price was rising between February 5 and February 24. OBV measures buying and selling pressure using volume. When OBV falls while price rises, it shows weakening buyer strength. This made the breakdown look even more convincing.

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But instead of continuing toward the 20% target, XRP quickly reversed and rebounded nearly 6%. This was the first sign that the breakdown had turned into a trap.

$770 Million Open Interest Surge Shows Traders Took the Bait

Open interest data confirms that traders reacted aggressively to the breakdown. Open interest, which measures the total value of active futures positions, surged from around $750 million on February 22 to nearly $770 million on February 23, just hours before the breakdown.

At the same time, funding rates dropped sharply from around –0.0025% to nearly –0.014%, a 460% surge in the short positioning intensity. This change is important.

Funding rates becoming more negative means short sellers are increasing rapidly and are willing to pay a premium to hold those bearish bets. In simple terms, traders were aggressively betting on XRP to crash further.

This created a crowded short trade. But when XRP rebounded instead of collapsing, many of those short positions were likely forced to close or reduce exposure.

Open interest later dropped from $770 million to around $756 million as the price rebounded. This decline suggests leveraged positions were closed during the reversal. Open interest alone does not confirm whether longs or shorts exited.

However, because funding rates were heavily negative before the rebound, it indicates bearish positions were dominant, and some of those traders likely reduced exposure or got liquidated as the breakdown failed.

150 Million XRP Whale Buying Happened During the Trap — Not Before It

Whale behavior during this period adds another critical piece. Wallets holding between 1 million and 10 million XRP increased their holdings from 3.77 billion XRP to 3.81 billion XRP. At the same time, the largest whale group, holding between 100 million and 1 billion XRP, increased holdings from 8.35 billion XRP to 8.46 billion XRP.

Combined, these groups added approximately 150 million XRP over two days, from February 23 to February 25. At an average price of $1.35, this equals about $200 million in buying. Importantly, this accumulation happened during and immediately after the breakdown.

This means whales were not panic-selling. They were absorbing supply as traders exited positions.

This behavior often reflects positioning during periods of elevated market fear. It also increases the chances that breakdown continuation may remain limited unless whales begin selling.

XRP Price Now Approaches Another Breakdown Zone — But Trap Risk Remains High

XRP is now approaching another critical risk zone (the neckline), this time near $1.31 as another right shoulder forms. This level remains the most important support. If XRP breaks below $1.31 and holds below it, the bearish pattern, with another 20%+ breakdown path, could again get activated.

In that case, the next downside targets sit near $1.26 and $1.17, highlighted later. These levels align with key technical support zones.

However, recent trap behavior suggests another scenario is possible. If XRP briefly breaks below $1.31 but quickly recovers, it could trigger another short squeeze.

On the upside, reclaiming $1.40 would weaken the bearish setup. The trap may be forming, as open interest has risen again to $754 million, and funding rates have moved back into negative territory.

A move above $1.67 would fully invalidate the head-and-shoulders structure. Until either level breaks decisively, XRP may continue moving inside a trap-prone range. For now, the data shows a clear pattern.

A 20% breakdown projection attracted aggressive short positions. Open interest surged. Funding turned deeply negative. But whales accumulated 150 million XRP during the panic. This combination suggests XRP’s bearish breakdown may have acted more as bait than confirmation.

The next move will decide whether the pattern finally delivers its projected decline or becomes another trap in an increasingly volatile derivatives-driven market.

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Author: Ananda Banerjee