XRP Vs. USD: Technical Analysis Indicates Road To $100 But Headwinds Persist

Key Takeaways

• XRP in April 2024 is trading into a symmetrical triangle six-year chart pattern apex, better known as a pennant or symmetrical triangle, and indicates a balanced probability of either a bullish breakout or a bearish breakdown.
• Since 2018, the XRP price has been making higher lows while the RSI shows lower highs, suggesting bearish momentum or weakening momentum that could lead to downward price movements.
• Since 2018, the XRP trading volume has been consistently decreasing since 2017, which could impact the strength and reliability of any potential price breakout or breakdown.
• XRP is down 83% from its (all-time-high) ATH in 2018 of $3.20 and is at $0.50 in April 2024.

The Ripple token XRP has impressively and consistently been in the top 10 by market cap for a decade due to its proclaimed, fast transaction speeds and adoption in the banking sector. XRP has long been a focal point in cryptocurrency discussions, with debates on whether it represents a valuable project or a scam.

XRP Versus USD: Technical Analysis Insights

This three part article will explain XRP’s potential future performance against the United States dollar (USD) and Bitcoin (BTC) using technical analysis. 

The analysis seeks to determine if the XRP price will increase between $3 to $100 (bull case) or stay within a range from $0.20 to $1 (bear case), with its price at $0.50 in April 2024, during forthcoming market cycles. Additionally, this analysis will assess XRP’s comparative performance against BTC.

XRP Versus USD: Pennant Chart Pattern

The monthly chart pattern of XRP/USD reveals a long-term consolidation pattern of six years, with the cryptocurrency trading within a symmetrical triangle or pennant structure since its peak in 2018, demonstrating periods of lower highs and higher lows. 

The chart pattern illustrated below signals that there is uncertainty amongst both bear and bull traders about the future direction of XRP.

In April 2024, XRP is beginning to approach the apex of the symmetrical triangle, and a breakout or breakdown appears likely, signaling a decision point that could result in a substantial price movement in either direction. As per the triangle, a move in either direction is expected around September 2024 or quarter four of 2024.

The first monthly chart pattern illustrated above, between 2012 and 2016, resembles a symmetrical triangle or a pennant also, which eventually broke out to a new all-time high (ATH) of $3.20 in 2018. However, since 2018, the price of XRP has not reached or come close to 2018 highs, marking lower highs and suggesting a prolonged period of consolidation without a bullish reversal to new highs. 

Despite these lower highs, XRP has recorded higher lows during this period. 

As shown above, the value of XRP has decreased by 83% over the past six years from its ATH between 2018 and 2024. This means that a purchase of $100 at $3.20, in the 2018 peak, can be sold for circa $17 today.

The above chart scenario analysis presents two possibilities: 

• A Bullish breakout: The pennant may break out and retest previous highs, and then break above 2018 highs of $3, and move into price discovery mode.
• A Bearish continuation: A downtrend in price at the apex of the triangle possibly printing lows of $0.20 cents or ranging to a $1 area, on a dead cat bounce and falling back down afterwards.
• Time horizon: The chart suggests that by quarter four of 2024, XRP versus USD will likely indicate whether it will break to the upside or downside

Both bull and bear cases may be argued, given the 2012-2016 chart pattern’s similarity to the current monthly chart pattern. 

The bull case for XRP in 2024 suggests that the XRP price will move upwards as XRP did in 2017-2018. A fractal of this move is illustrated below and can be seen that XRP may reach as high as $100 (extremely and highly unlikely). The bear case is that XRP will break down from the pennant or experience a dead cat bounce followed by more declines. The below chart is a representation of the two possible outcomes that likely follows pennant structures.

Pennant Volume Drop: XRP Volume Since 2017

To decide whether XRP will break out or break down in the coming months, we can also refer to the XRP volume. Volume usually diminishes as the pennant chart pattern develops due to decreased trading activity during consolidation. 

A key characteristic of a true pennant is a significant drop in volume during its formation followed by a noticeable increase on the breakout.

• Breakout: The breakout typically occurs in the direction of the prevailing trend and should happen before the pattern reaches the triangle’s apex. A pennant that takes too long to form or does not break out before reaching the apex can lose its significance.
• Confirmation: A breakout should be confirmed with an expansion in volume, which adds validity to the breakout. Some traders may look for a close outside the pennant or a two-candle close outside the formation for extra confirmation.

Above depicts a consistent decrease in volume over a six year period for XRP which can have several interpretations, especially in the context of a symmetrical triangle chart pattern approaching its apex:

• Consolidation phase: The declining volume reflects a prolonged consolidation phase, often with diminished trading interest as the market awaits a new catalyst or direction.
• Indecision among traders: Lower volumes indicate less trading activity, which suggests that traders are unsure about the future direction of XRP and are waiting on the sidelines.
• Upcoming Pennant/Triangle Apex: As the apex of the triangle nears, projected to be around September 2024, the market may be expecting a significant move in any direction. 
• Market Cycle: A long period of declining volume typically indicates the end of a cycle and the potential for the start of a new one.

Given these factors, the declining volume 153 odd days before the apex could suggest that the market is compressing and that traders should be prepared for increased volatility as the apex of the triangle is reached.

RSI Complex Divergence: Long Term RSI Of XRP/USD

The RSI (Relative Strength Index), a momentum oscillator, identifies overbought conditions above 70 and oversold conditions below 30. In the below chart, the monthly RSI spanning six years is neither overbought nor is it oversold but exhibits a type of bearish divergence where the price of XRP is making higher lows, and the RSI forms lower highs and lower lows, suggesting weakening momentum that could lead to a more potential downside.

Technical Analysis Theory: Bearish divergence typically refers to the scenario where the price of an asset is making higher highs while the RSI is making lower highs. This suggests that the upward price movement is not being supported by growing momentum and could indicate a potential reversal to the downside. However, divergence can also be observed with the price making higher lows in an uptrend, which might be less commonly discussed but is still valid.

In the chart illustrated above, XRP is making higher lows against the USD (indicating an uptrend). However, the RSI is making lower lows or failing to make higher highs alongside price, which can still be considered a form of bearish divergence. 

The price action in XRP and its relative RSI implies that each push upward in the XRP price is accompanied by weaker momentum, which could signal a weakening XRP trend and potential for a trend reversal or a slowdown in the uptrend (higher lows).

While not typical, this kind of ‘bearish’ divergence pattern might be interpreted as a sign that despite the XRP price not reaching new highs (hence the lower highs), in six years, the buyers are gradually losing strength, as indicated by the lower highs in the RSI. 

The higher lows in the XRP price suggest that some support is preventing the XRP price from making new lows which is apparent, but the decreasing RSI points to diminishing momentum or slowing buying power on each successive move upward.

This can also be seen as complex divergence, with the price making lower highs and higher lows while the RSI shows lower lows and lower highs, also indicative of a complex divergence. 

In this case, XRP depicts a complex form of bearish divergence, as the RSI is failing to make higher highs even though the price is not pushing to new lows, suggesting that while there may be a lack of strong bullish momentum to drive up prices, there is support preventing further declines, leading to an overall consolidation in price action.

Traders might seek additional confirmation from other indicators or price patterns before deciding based on this divergence.

Price Forecasts of XRP/USD: To The Moon Or Not?

The bear and bull scenarios for XRP can be examined from both a technical and fundamental aspect.

Bearish Case: 5050 Likelihood

• Price range: The bear case emphasizes that XRP continues to range between $1 and $0.20 as Bitcoin continues to make new highs. This prolonged range-bound action can indicate a lack of strong buying interest at higher price levels and selling pressure at lower bounds that prevent price depreciation below $0.20.
• Competition from Bitcoin: Bitcoin, often called “digital gold,” has solidified its position as the market leader and a primary entry point for new capital into the cryptocurrency market. It tends to attract most institutional investment, which may limit the funds flowing into altcoins like XRP.
• Legal and regulatory challenges: XRP has faced significant legal and regulatory headwinds, notably the SEC lawsuit  alleging that XRP was sold as an unregistered security. These legal issues can deter investors due to the uncertainty and potential adverse outcomes that could impact the asset’s value.
• Technology adoption: While Ripple’s technology has seen some adoption for cross-border payments, it’s not clear that this has translated into increased demand for XRP tokens, mainly as RippleNet can operate without necessarily utilizing XRP

Bullish Case: 5050 Likelihood

• Fractal analysis: The bull scenario hinges on a fractal analysis where the price action of XRP during 2016-17 is used to forecast potential future breakouts. If a similar pattern were to occur, the price could possibly fall initially as a final shakeout and then increase to $3 and even reach as high $8-14 or even $100 (yet $100 is highly unlikely).
• Potential catalysts: For such a dramatic price increase to materialize from $0.50, significant catalysts would be necessary. This might include resolution of legal issues, widespread adoption of XRP in the banking and financial industry, or a shift in investor sentiment leading to a strong demand for XRP, which realistically is not going to happen.

Why The XRP 2018 Fractal To $100 Is Extremely Unlikely

• Diminishing returns: As markets mature, they often exhibit diminishing returns. The kind of meteoric rises seen in the early days of cryptocurrencies is less likely as the market cap grows, requiring exponentially more capital to produce similar percentage gains.
• Increased scrutiny: With greater regulatory scrutiny and investor sophistication, the market dynamics have shifted. Hype alone is less likely to drive substantial and sustained price increases without solid fundamentals to back it up. Yet, it may lead to dead cat bounces in XRP but this is not healthy or sufficient long term.
• Market saturation: The cryptocurrency market has become increasingly crowded with thousands of tokens marketing themselves for investors’ attention. This saturation means that XRP is just one of many options for investors, diluting the potential for massive inflows into any single asset.
• Technological competition: The landscape of blockchain and cryptocurrency technology has evolved, with numerous projects offering similar or superior capabilities compared to Ripple’s offerings. This competition may hinder the ability of XRP to capture a significant market share.
• Historical performance: Past performance is not indicative of future results. The extraordinary returns seen in 2016-17 were during a period of widespread enthusiasm and adoption, which may not be repeatable under current market conditions.

Conclusion

In conclusion, XRP/USD stands at a crossroads with its future price action hinging on a breakout from a long-term consolidation pattern. While the bull scenario draws upon historical fractals suggesting a potential increase to new highs, this outlook is dampened by market maturation, heightened competition, regulatory challenges, and a notable shift in investor sentiment. 

The bear perspective, underscored by a range-bound form of price action and the possible continuation of a downtrend, seems more plausible given the current technical and fundamental landscape. 

Considering the diminishing volume and bearishness in the RSI, XRP may face headwinds in achieving the heights of $100 in the future. Instead, a more cautious approach and vigilance for a definitive breakout direction, supported by solid volume and other confirming indicators, appear to be a prudent strategy for market participants observing XRP against both USD and BTC.

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About the Author

Andrew Kamsky

Andrew Kamsky is a writer and chart analyst, holding a degree in Economics and an ACCA certification. Andrew’s professional background spans roles at a Big Four accountancy firm, a fintech bank, and a chart analyst position at a listed bank focusing on foreign currency hedging. Beyond his financial career, Andrew is passionate about music, glass neon lights and travel.

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