XRP has seen a remarkable surge in price recently, reaching levels not seen in years. However, a concerning technical pattern has emerged that could signal a potential downturn: a bearish divergence. This divergence, coupled with other factors, raises the possibility of XRP revisiting the $2 price range.

Understanding the Bearish Divergence

A bearish divergence occurs when the price of an asset reaches higher highs, but a momentum indicator, such as the Relative Strength Index (RSI), forms lower highs. This suggests that while the price is still rising, the underlying momentum is weakening. In the case of XRP, this bearish divergence on the daily chart indicates that the recent rally may be losing steam.

Why This Matters

Bearish divergences are often seen as early warning signs of a potential trend reversal. They suggest that the buying pressure is waning, and the asset may be overbought. In XRP's case, this could mean a correction is on the horizon, potentially leading to a retest of lower support levels.

The $2 Retest Scenario

The $2 price level is a significant support zone for XRP. A retest of this level would not only be technically significant but also psychologically important for traders. If XRP fails to hold above $2, it could lead to further downside movement.

What Bulls Must Do

Despite the bearish divergence, the bullish scenario is not entirely invalidated. For the bulls to regain control, they need to:

* Hold above key support levels: The most crucial support level to watch is the upper trendline of the recent bull flag pattern. A successful bounce from this trendline would strengthen the bullish case.

* Invalidate the bearish divergence: This can be achieved if XRP manages to break above the previous high that formed the bearish divergence. This would signal renewed bullish momentum.

* Maintain positive sentiment: Positive news and developments around XRP, such as the potential launch of spot XRP ETFs, can help to maintain bullish sentiment and drive buying pressure.

Conclusion

The bearish divergence in XRP's chart is a cause for concern, but it doesn't necessarily guarantee a price crash. The bulls still have a chance to turn the situation around if they can hold key support levels and invalidate the bearish signal. However, traders should proceed with caution and be prepared for potential downside volatility.