XRP Today News: Yen Arbitrage Close Position Triggers Crash, Fears Test $1.80 Bottom

XRP follows the crash of the crypto assets market, dousing hopes for an end to the sluggish market in October and November. The Governor of the Bank of Japan, Kazuo Ueda, hinted at a rate hike in December, and hawkish comments led to Japanese government bond yields soaring to 1.84%, the highest level since April 2008, triggering Close Position in yen arbitrage trades. Vanguard this week provided a crypto assets ETF trading channel to its $10 trillion client base, which could drive a Rebound.

Japan's government bond yields surge triggering XRP sell-off

(Source: Trading View)

The core focus of today's XRP news is that Japanese government bond yields have reached 2008 levels, causing borrowing costs to soar and impacting leveraged crypto positions. The Kobeissi Letter expressed concerns about the rise in Japanese government bond yields during the early trading session on December 1, noting that the 10-year Japanese government bond yield surged to 1.84%, the highest level since April 2008.

The previously lower Japanese government bond yields have driven yen arbitrage trades into risk assets such as Bitcoin and XRP. The logic behind yen arbitrage trading is as follows: traders borrow yen at near-zero interest rates, convert it into dollars, and then invest in high-yield assets like XRP. As long as Japan maintains low interest rates, these trades can be profitable. However, when Japanese government bond yields soar, the cost of borrowing yen rises, forcing arbitrage traders to close their positions.

The Bank of Japan will announce its monetary policy decision on December 19, which will be a key event. Policymakers are likely to lay the groundwork for interest rate hikes in the coming weeks, which may push up Japanese government bond yields. Higher borrowing costs will exacerbate the closing of the yen arbitrage trades and lead to the fall of Bitcoin, XRP, and the entire market. The market currently expects a probability of about 62% for the Bank of Japan to raise interest rates on December 19, and this high probability expectation is triggering arbitrage closings in advance.

The Kobeissi Letter reported on the state of the crypto assets market: “In the past 24 hours, the crypto assets liquidation amount surged to 900 million USD, and the price of Bitcoin fell to around 84,000 USD. Although there were no headline news or market fluctuations, Bitcoin's market capitalization evaporated by 120 billion USD within 24 hours. Leveraged trading is a dangerous game.” This large-scale liquidation shows that the impact of yen arbitrage Close Position is not limited to XRP but affects the entire crypto assets market.

As background, the Bank of Japan reduced its purchases of Japanese Government Bonds (JGB) and raised interest rates in July 2024, triggering a close position in yen arbitrage trading. As a result, the price of XRP fell from $0.6591 to $0.4320. However, this pullback lasted a very short time, and XRP returned to the $0.60 level within eight trading days. This historical case provides a reference for the current situation: the impact of yen arbitrage close positions may be severe but short-lived.

Looking ahead to December 2025, the market has already priced in expectations of interest rate cuts by the Federal Reserve. If the Bank of Japan raises interest rates while the Federal Reserve cuts them, the interest rate differential between the US and Japan will further narrow, potentially prolonging the sell-off in the fourth quarter. The uncertainty created by this policy divergence is the biggest risk factor in today's news regarding XRP.

Technical Analysis of XRP Falling Below 2 USD

(Source: Trading View)

The price trend on December 1, combined with bearish technical indicators, further confirmed the previous bearish expectations for XRP's short-term (1-4 weeks) performance. On Monday, December 1, XRP fell by 5.78%, down 2.08% the previous day, closing at $2.0311. The token's decline was greater than that of the broader market, which fell by 4.50%. Monday's sell-off drove XRP well below the 50-day and 200-day Exponential Moving Averages (EMA), again confirming the bearish inclination.

XRP Key Technical Levels List

Support Level: $2.0 (psychological barrier), $1.9112 (secondary support), $1.8239 (November low)

Resistance Levels: $2.2, $2.3241 (50-day EMA), $2.5019 (200-day EMA), $2.62, $2.8, $3.0, $3.66 (historical high)

The failure to maintain 2.0 USD as a psychological barrier has significant market psychological implications. Round numbers often accumulate a large number of limit orders and psychological expectations, and breaking below them may trigger a chain reaction of stop-loss orders. Currently, XRP is barely holding at 2.0311 USD, indicating that this support level is still in contention. If it closes below 2.0 USD, the next support at 1.9112 USD will be tested quickly.

The November low of 1.8239 USD is the most critical support level in the short term. This price level represents the lowest point of the previous adjustment, and in technical analysis, previous lows often become target levels for subsequent declines. If XRP falls to this level, it is appropriate for traders holding long positions to set their stop-loss at 1.8239 USD. A break below this support will open up more room for a deeper decline.

The 50-day EMA is at $2.3241, and the 200-day EMA is at $2.5019. When the price is below these two important moving averages, it indicates that both the medium-short term and long-term trends are bearish. Only by reclaiming these two moving averages can the trend reversal be confirmed. Currently, XRP is approximately 14% away from the 50-day EMA and about 23% away from the 200-day EMA. This significant divergence indicates a technical demand for a short-term rebound, but whether it can be sustained depends on fundamental support.

Vanguard and ETF inflow mid-term turning point

Despite the strong bearish momentum in the short term, there are also medium-term positive factors in today's news regarding XRP. The upcoming influx of funds into the XRP spot ETF and Vanguard's entry may drive a medium-term rebound. According to reports, Vanguard Group will provide cryptocurrency ETF trading channels to its brokerage clients on December 2 (Tuesday), which will be open to a client base of up to $10 trillion.

Vanguard's move comes right after the launch of the XRP spot ETF, which may benefit from this asset management company's entry into the digital asset space. Vanguard is one of the largest asset management companies in the world, primarily serving conservative long-term investors. This type of investor has had limited access to crypto assets in the past, and Vanguard's opening of trading channels will create a massive potential demand pool for the XRP ETF.

It is crucial that as the “Market Structure Act” progresses on Capitol Hill, the group of cryptocurrency investors may further expand in the new year. A crypto-friendly framework and a supportive U.S. government for crypto assets will boost demand and potentially drive XRP to new highs. BlackRock's launch of the iShares XRP Trust demonstrates the increasing interest of institutional investors in XRP.

The market information platform Santiment made optimistic remarks amid widespread pessimism in the market, stating: “Looking for signs of surrender? Retail interest in most topics that will dominate the period of 2025 is decreasing. As discussions related to crypto assets are becoming less frequent, we are continuing to approach a potential bottom.” This extreme pessimism in sentiment indicators often signals a reversal opportunity.

The fall on December 1 and the continued downward trend in the fourth quarter will raise questions about the feasibility of BTC and XRP as blue-chip reserve assets. XRP fell by 28.41% in the fourth quarter, while BTC dropped by 24.11%. Meanwhile, gold prices increased by 9.69%. However, as market pressures ease, the fourth-quarter sell-off may reignite institutional demand through spot ETFs, thus supporting a bullish outlook in the medium term.

XRP Facing Dual Scenario Pathways

XRP today's news reveals the dual scenario paths facing this asset. In a bearish scenario, negative events will lead to XRP falling below the psychological support level of $2.0. After breaking below $2.0, the support level of $1.9112 will become the next key support level. If this support level is breached, the low point of November 21 at $1.8239 and the downward trend line below will become the next key support level.

Five Major Risk Factors in Bearish Scenarios

MSCI removes Digital Asset Treasury (DAT): Reducing blue-chip companies' interest in using XRP as a treasury reserve asset.

Senate Opposes Market Structure Bill: Regulatory uncertainty continues, institutions adopt a slowdown.

The U.S. Office of the Comptroller of the Currency Rejects Bank Charter Application: Ripple's Entry into Traditional Finance Hindered

XRP Spot ETF Fund Inflows Weak: Institutional Demand Below Expectations

Japan Central Bank 2026 Interest Rate Hike Expectations: Arbitrage Close Position Pressure Continues

The bullish scenario is based on institutional adoption and improvements in the regulatory environment. The medium-term price outlook depends on several key events: the Federal Reserve will adopt a dovish interest rate cut policy in December, the Bank of Japan will raise interest rates once in December (ending uncertainty), the market structure bill has passed Senate review, strong inflows into the XRP spot ETF, and BlackRock launching the iShares XRP Trust. These events will support the coin price rebound to the historic high of $3.66 set in July.

XRP will face a critical trading day on December 2, with weak inflows into the spot ETF and risks of closing positions in yen arbitrage intertwined. The progress of the market structure bill, U.S. economic indicators, and the policy trends of the Bank of Japan and the Federal Reserve will all impact market sentiment. Rising Japanese government bond yields and opposition to the market structure bill may weaken demand for XRP, potentially pushing the token down to $1.9112 or even lower to $1.8239.

In summary, today's news about XRP indicates that the short-term outlook remains pessimistic, while the medium to long-term outlook is more optimistic. Investors should closely monitor the key support level of $1.8239, as it will determine whether XRP is forming a bottom for a rebound or entering a deeper adjustment phase.