After displaying a supernormal rally that amounted to more than 60 percent gains within a week, XRP is now doing a complete reversal.
Ripple has lost more than $9.5 billion in market cap since establishing its highest peak since April. The coin reached its high on Friday last week, at around $27.5 billion, but witnesses the execution of massive long positions around the said level. The weekend and the beginning of the week that followed later saw XRP wiping almost 22 percent of its market cap, so as the per unit value. The bearish momentum intensified further during the Tuesday’s Asian trading session, amounting to a 40 percent intraweek loss.
XRP is trading at $0.46 at the time of this writing.
XRP is backed by a Ripple Labs, a blockchain-based payment provider, that over the course of the previous week, signed impressive partnerships with leading banks and promising crypto-services. It also announced the launch of its xRapid, an XRP-denominated payment service, in October.
The fundamentals looked strong at that time, which influenced speculators to go long on their XRP positions against the US Dollar and Bitcoin. As the value picked up violently, without a hint of a pullback, the FOMO sentiment took over and traders started buying at new highs in a lookout for an extended bull run. Eventually, the XRP value against the USD ended up establishing a new peak near $0.79, just marginally below its April high.
The bearish cracks began appearing thereon, as XRP found stability within a range defined by $0.596-resistance and $0.52-support. The absence of bulls intensified the bearish sentiment and traders started executing their long positions on decent weekly profits. Hence, the drop.
The Ripple technicalities are left with two possible outcomes: either XRP/USD is heading to form a head and should pattern as it extends its bearish momentum, or it is looking for a pullback from the rising trendline, confirming a bull flag formation. We are already looking at the pair attempting a reversal from the ascending trendline, but we could not tell its validity purely because its too soon. That said, we should divide our predictions between the two scenarios: a breakdown and a pullback.
So, a reversal from ascending trendline creates a decent long-opportunity towards 0.52-fiat in near-term. Putting a stop loss somewhere 2 pips below the entry point will minimize our losses. (1 pip ~ $0.00100)
In the event of a breakdown, the next short target that is there is around 0.424-fiat, which proved to a reliable support during the July price action.
Featured image from Shutterstock. Charts from TradingView.
Last modified: March 4, 2021 3:44 PM