XRP bulls should prepare themselves for a potential decline in the coming weeks as several indicators point towards downside movement. These indicators include a bear flag pattern, on-chain metrics, and fundamental factors.
The bear flag pattern is the first indicator suggesting a possible downturn for XRP. This pattern is characterized by a small, upward-sloping rectangle formed by parallel lines against the prevailing downtrend. It typically resolves when the price breaks decisively below its lower trendline and falls by a height similar to the prevailing downtrend. Currently, XRP is hovering near the lower trendline of its bear flag, indicating a potential breakdown. Additionally, the weekly relative strength index (RSI) for XRP is around 40, which is a neutral territory that suggests the possibility of further declines in the market.
If XRP’s price decisively breaks below the flag’s lower trendline, there is a risk of a fall towards $0.24, which is approximately a 55% decrease from the current price levels. This decline could occur by May or June.
Another factor contributing to the potential decline in XRP is the substantial inflow of XRP tokens into exchanges, including Bitstamp. Data from Whale Alert shows that Ripple transferred $24.75 million worth of XRP tokens into an unknown wallet on January 30. This transfer is likely part of Ripple’s routine operations involving the tokens unlocked from escrow each month. The timing of these transfers aligns with a significant shift in the distribution of XRP holdings, with a decrease in the reserves of whales holding between 100 million and 1 billion tokens and an increase in holdings by entities possessing over 1 billion tokens, possibly crypto exchanges. This suggests that whales may be selling or redistributing their XRP holdings.
On the technical side, XRP faces the possibility of a “death cross” and a head-and-shoulders breakdown. A death cross occurs when the 50-day exponential moving average (EMA) crosses below the 200-day EMA, signaling a bearish trend. XRP is also forming a head-and-shoulders pattern on its daily chart, which is a reversal pattern indicating a shift from a bullish to a bearish trend. Analysts measure the price target for the head-and-shoulders pattern by calculating the maximum distance between the head’s peak and the neckline and extending it downward from the point where the price breaks through the neckline. Applying this rule to XRP’s head-and-shoulders pattern suggests a price target of around $0.34, which is a 30% decrease from the current price levels.
The absence of a spot XRP exchange-traded fund (ETF) is another factor that could dampen the demand for XRP compared to Bitcoin and Ethereum. Analysts are not optimistic about the possibility of a spot XRP ETF anytime soon due to the ongoing lawsuit between Ripple and the U.S. Securities and Exchange Commission, as well as the absence of an XRP futures ETF in the United States.
It is important to note that this article does not provide investment advice or recommendations. Readers should conduct their own research and assessment of risks before making any investment or trading decisions.