The bullish momentum that XRP enjoyed during the fourth quarter has come to a halt, with the token now in danger of a deeper price decline. The latest dip has pushed XRP below the $2 support level for the first time since February 2, signaling increased vulnerability amidst a broader market downturn.
Market Factors Driving XRP’s Decline
The primary driver behind this decline seems to be the ongoing macroeconomic issues in the United States. With former President Donald Trump threatening substantial tariffs on goods from Canada, Mexico, and China, concerns about stagflation have risen. This could force the Federal Reserve to cut interest rates prematurely, resulting in further economic uncertainty.
Adding to the concern, the 10-year Treasury yield has decreased to 4.26%, while the 30-year yield has dropped to 4.53%. Just months ago, both were hovering near 5%, reflecting the Fed’s previous stance of maintaining higher rates for an extended period.
Despite this market turbulence, Ripple’s underlying fundamentals remain strong. The odds of a favorable outcome in its legal battle with the U.S. Securities and Exchange Commission (SEC) have improved, especially given the SEC’s recent decision to drop lawsuits against platforms like Coinbase and Uniswap.
Ripple’s Ecosystem Remains Resilient
Moreover, the XRP Ledger ecosystem continues to grow, attracting more developers and keeping the network vibrant. Speculation around a potential XRP spot exchange-traded fund (ETF) is also on the rise. If approved, an XRP ETF could bring billions of dollars in inflows, boosting demand for the token.
Technical Indicators Point to More Downside for XRP
From a technical perspective, XRP has entered a critical danger zone. After dropping to a low of $1.9615, it breached a key support level, which also happens to be the neckline of a head-and-shoulders pattern. This chart pattern is a bearish signal, indicating the potential for further downside once the neckline is broken.
XRP’s price has also fallen to the 50% Fibonacci retracement level, slipping below the 50-day moving average. Additionally, the Average Directional Index (ADX) has surged to 36, indicating a strong bearish trend. ADX values above 20 suggest that momentum is strengthening in the direction of the prevailing trend.
What’s Next for XRP?
Based on these technical signals, XRP could continue its descent, possibly reaching the 61.8% Fibonacci retracement level at $1.6230. This is typically where most pullbacks find support. However, if XRP fails to hold this level, it could see a significant drop, potentially testing the 78.6% retracement level at $1.13—roughly 45% below its current price.
For now, investors will need to watch for a reversal at these critical support levels. If XRP fails to bounce back, a 45% drop could be a real possibility. The outcome will largely depend on the broader market trends and whether XRP can regain bullish momentum or if the bearish trend will continue to dominate.
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