According to Cointelegraph, the XRP cryptocurrency is exhibiting signs of a potential downturn as a classic head-and-shoulders pattern emerges on lower timeframes. This bearish technical formation, coupled with significant long liquidations and declining open interest, suggests weakening trader confidence in XRP futures.
The head-and-shoulders pattern, identified on XRP's four-hour chart since May 9, indicates a possible 14% price drop. This pattern, known for signaling trend reversals, consists of three peaks: a higher peak (head) and two lower peaks (shoulders). The pattern is confirmed when the price breaks below the neckline, which connects the lows of the left and right shoulders, suggesting a potential sell signal. In XRP's case, the pattern was validated when the price fell below the neckline at $2.33 during early Asian trading hours on May 19. If the price remains below this level, the XRP/USD pair could further decline to $2.25, where the 200-day simple moving average currently resides, and potentially reach the pattern target of $2.00, marking a total loss of 14% from current levels.
As reported by Cointelegraph, the possibility of a decline to as low as $2.00 is currently unfolding as bullish momentum wanes. Analyst Egrag Crypto emphasizes the importance of maintaining support at $2.30, which aligns with the head-and-shoulders neckline, to prevent a breakdown toward lower targets. The analyst's chart indicates that a drop below $2.30 could initiate a substantial sell-off, with initial targets around $2.15 and potentially as low as $1.60.
In addition to the technical patterns, XRP's open interest has decreased by 18% to $4.49 billion over the past five days, signaling reduced trader confidence and liquidity, which contributes to downward price pressure. The recent decline in XRP's price has also led to liquidations, with long positions valued at $12 million being forcibly closed, compared to just $1.4 million in shorts. This scenario reflects increased selling pressure as bullish traders are compelled to sell at a loss, further driving prices lower.
Notably, XRP's 3% drop over the last 24 hours is accompanied by a 70% surge in daily trading volume to $4.1 billion. An increase in trading volume amid a price decline can be interpreted as growing bearish momentum or repositioning by crypto traders as they anticipate XRP's next move. Readers are reminded that this article does not offer investment advice or recommendations, and every investment and trading decision involves risk. Conducting thorough research is advised before making any financial decisions.
