XRP Faces Potential Price Drop Due to Bearish Indicators and Legal Challenges
Summary:
The cryptocurrency XRP faces a potential price drop in the coming weeks, as hinted at by four different metrics. A bear flag pattern and a neutral weekly RSI of 40 suggest a bearish trend. The influx of XRP into crypto exchanges and the redistribution of holdings by large token holders point towards a sell-off. Two technical setups, including a 'death cross' and a breakdown of the 'head-and-shoulders' pattern, might accelerate the sell-off. Additionally, lack of optimism regarding a spot XRP ETF due to Ripple's ongoing lawsuit with the SEC can dampen demand for XRP tokens compared to Bitcoin and Ether.
Investors in the cryptocurrency XRP (XRP) should be prepared for a possible drop in prices in the near future, as indicated by four different metrics, comprised of technical, fundamental, and on-chain indicators. The bear flag pattern is the first sign suggesting XRP may face a downturn. This pattern, identified as a small rectangle trending upwards, emerges in opposition to a dominant downtrend, indicating a continuation of the bearish trend. This resolves when the price conclusively falls below the lower trend line, sinking to the height of the previous downtrend. As of January 30, XRP appears to be teetering on its bear flag's lower trend line, warning of a possible fall. Simultaneously, its weekly relative strength index (RSI) is around 40, a neutral point suggesting more potential losses.
A significant break below the flag's lower trend line could set XRP's price on a downward trajectory towards $0.24 by May or June, a 55% fall from current levels. This prediction aligns with the major influx of XRP, amounting to hundreds of millions of dollars, into Bitstamp and other crypto exchanges, as relayed by Whale Alert data. This includes Ripple's January 30 transfer of $24.75 million of XRP tokens into an unidentified wallet, likely part of Ripple's routine token operations unlocked from escrow every month.
The timing of these substantial XRP transfers to exchanges coincides with a significant shift in XRP distribution. It's observed that whales holding between 100 million and 1 billion tokens (teal wave) have decreased their XRP reserves, while there's an increase in holdings by entities (likely crypto exchanges) owning over a billion tokens (black wave).
There is also a corresponding increase in supply by the group of entities holding between 10 to 100 million XRP (red wave), indicating whale redistributions or sell-offs.
Two more indicators of a potential sell-off are the 'death cross' and a breakdown of the head-and-shoulders (H&S) pattern that have emerged on shorter timeframes. The former involves XRP's 50-day exponential moving average (50-day EMA; the red wave) crossing below its 200-day EMA (the blue wave), typically considered a bearish indicator. The H&S is a trend reversing pattern marked by a high peak (head) between two lower ones (shoulders) atop a common support line (neckline). Applying this principle to XRP's H&S pattern leads to a price target of around $0.34 by March or April, a 30% fall from its present levels.
Lastly, cryptocurrency analysts don't see a spot XRP ETF on the horizon, which could potentially lessen demand for XRP tokens as compared to Bitcoin (BTC) and Ether (ETH). The ongoing Ripple and U.S. Securities and Exchange Commission (SEC) lawsuit, and the lack of a U.S-based XRP futures ETF, contribute to this outlook. For a spot XRP ETF to be deemed feasible, the SEC would need to concede XRP is not a security, an unlikely scenario for now, according to Townsend Lansing, head of product at CoinShares.
Published At
1/30/2024 8:20:00 PM
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