XRP faces negative sentiment after 19% drop from January highs

The crypto market is seeing a pessimistic turn around XRP, with the token pulling back significantly from its highest levels at the start of the year. According to Santiment’s sentiment indicators, the online conversation has taken on a markedly negative tone, reflecting the change in mood among market participants.

The Extreme Fear Index and the Deterioration of Social Sentiment

Starting from the high reached on Jan. 5, XRP has seen a roughly 19% pullback, enough to trigger “extreme fear” readings according to Santiment’s analysis. This change in sentiment does not arise from price alone, but from the analysis of social dialogue on key platforms where traders discuss strategies and market outlooks.

The negative deterioration in sentiment suggests that small investors have moderated their buying strategies, moving away from dip opportunities or staying on the sidelines entirely. This might seem like a sign of eventual surrender can quickly transform if the market bottoms out and buying restarts. Historically, extreme readings of fear have coincided with major tipping points, although they do not function as precise timing tools.

On-chain data reveals a worrying fork structure

Beyond social indicators, on-chain analysis suggests a vulnerable setup. The current distribution of XRP holders is beginning to resemble the structure seen in early 2022, a period that preceded months of widespread weakness. Recent buyers, those who have accumulated positions in the last weeks or months, have paid prices below the cost basis of holders who bought between six and twelve months ago.

This specific setup emerged in February 2022, when XRP was trading near $0.78 before sliding for months, eventually hitting lows around $0.30 mid-year. The similarity of these structures raises questions about whether the market is consolidating ahead of larger moves or whether it faces sustained pressure.

Current Market Data

According to updated market information, XRP is trading at $1.81 with a 24-hour variation of -5.21%. The market sentiment reflects a 50% bearish position according to technical indicators. The network maintains 7,553,647 active holder addresses, indicating a persistent user base despite recent volatility.

The role of institutional flows

There is an interesting contradiction in the data: while retail sentiment is progressively turning negative, institutional financial products are showing mixed movements. U.S.-listed XRP ETFs have attracted net inflows of $91.72 million in the current month, looking for the trend of sustained outflows plaguing Bitcoin ETFs. This divergence suggests that institutions may be evaluating positions while retail pulls out.

Forward Perspectives

The key to the next move lies in how the price reacts at these levels. If XRP stabilizes and begins to regain ground, the negative sentiment may quickly reverse, fueling the early stages of a recovery. A positive narrative shift could again attract small traders who have remained cautious.

If, on the other hand, weakness persists, the extreme fear index will simply document a market in search of a stronger foothold, not necessarily indicating an imminent turnaround. The history of 2022 offers valid precedents, but each market cycle contains its own unique dynamics. Traders should monitor both social data and on-chain indicators to identify when the first signs of genuine strengthening emerge.