Why Extreme Fear On XRP Could Signal A Rally

XRP has entered extreme fear territory, a condition that has historically preceded sharp upside moves.

In a market update video he shared on January 22, popular cryptocurrency trading analyst Zach Rector highlighted collapsing social sentiment around XRP, at the same time pointing to growing upside asymmetry, a setup he believes often appears just before major rallies. As Rector put it in his update:

“When retail sentiment is terrible, it’s bad, it’s negative, that’s typically a buy signal, when it’s time to enter into the trade, enter in and pick up your assets before they go on another rally.”

Extreme Fear Is Historically A Buy Signal

Rector referenced sentiment data from blockchain and crypto industry monitoring platform Santiment, which tracks positive versus negative commentary across social media.

According to this data, when sentiment falls into deep fear, price often bottoms, and when optimism spikes, rallies tend to stall or reverse. Explaining this dynamic, Rector said:

“When the sentiment is all positive to the moon, and we’re having a party, that’s when it’s time to take some profit or de-risk.”

Rector noted that XRP recently slipped back into the fear zone, echoing conditions seen before previous rallies. Earlier sentiment collapses in January preceded strong upside moves toward the $2.40 area, reinforcing the contrarian signal. Referring to those prior moves, he commented:

“So, what we saw on January 2, XRP gets a buy signal as the sentiment absolutely tanks. And that was the start of this year, right before we went on that massive rally to start off the year, all the way up to $2.40.”

Though Rector emphasized this is not financial advice, he explained that markets routinely move against retail expectations, especially when pessimism becomes extreme.

*XRP price chart analysis. Source: Zach Rector*

Higher Lows Begin To Form On XRP

From a technical perspective, Rector pointed to XRP holding higher lows around the $1.90-$1.91 region, suggesting buyers are quietly stepping in despite negative sentiment.

After bouncing toward $1.98 earlier, XRP pulled back but avoided breaking recent support in a pattern often associated with accumulation rather than distribution. Rector disclosed that he personally added to his XRP position near the $1.80-$1.88 range as sentiment deteriorated further.

Confirming that decision, he stated:

“Yesterday, I did buy the dip. I did load up and added big time to my XRP position at $1.80.”

Currently, XRP is changing hands at $1.90, down 0.9% in the last 24 hours, dipping 7.5% across the previous seven days, but advancing 2.4% on its monthly chart, according to the most recent price information.

*XRP price 30-day chart. Source: CoinGecko*

“When retail sentiment is terrible, it’s bad, it’s negative, that’s typically a buy signal, when it’s time to enter into the trade, enter in and pick up your assets before they go on another rally.”

Regulatory Clarity Adds A Tailwind

Beyond price action, Rector highlighted a newly released draft from the U.S. Senate Agriculture Committee covering digital asset market structure.

The proposed Digital Commodity Intermediaries Act (DCIA) focuses on regulating intermediaries, not users, wallets, or non-custodial decentralized finance (DeFi) interfaces, in a framework Rector described as a major win for crypto innovation. Reacting to the draft, he said:

“Self-custody wallets are explicitly not regulated. This is a big one. Huge win for crypto and for self-custody.”

Under the draft, self-custody wallets remain unregulated, non-custodial DeFi interfaces are protected, and platforms taking custody fall under Commodity Futures Trading Commission oversight.

*Analyzing the DCIA. Source: Zach Rector*

Rector believes this clarity could unlock broader adoption and capital inflows across crypto markets. As he summarized:

“This is the type of bill that allows us [the United States] to become the crypto capital of the world. I am absolutely in love with what I’m seeing in this text.”

With sentiment deeply negative and regulatory clarity improving, Rector argues XRP may be approaching another inflection point. Historically, these conditions have rewarded investors willing to act when fear is highest, not when optimism returns.