Main points:
The XRP (XRP) value is showing cautionary signals as a bearish technical formation unfolds on shorter timeframes, along with significant long liquidations and dropping open interest.
XRP H&S pattern suggests a 14% price decline
XRP’s price movement has established a head-and-shoulders (H&S) configuration on its four-hour chart since May 9, indicating a probable downward shift.
The head-and-shoulders pattern is a bearish reversal configuration that can indicate a trend shift. It consists of three peaks: a higher peak (head) and two lower peaks (shoulders).
This pattern is confirmed when the price dips below the neckline (the line connecting the lows of the left and right shoulders), validating the formation and implying a potential sell indicator.
In XRP’s situation, the pattern was confirmed after a breach and close below the neckline at $2.33 during early Asian trading hours on May 19.
If the price remains under the neckline, the XRP/USD pair could descend further to $2.25 (the level of the 200-day simple moving average) and eventually reach the target of $2.00. This would amount to an overall decline of 14% from current prices.
As Cointelegraph noted, a potential drop to as low as $2.00 is currently anticipated as bullish momentum has diminished.
For well-known analyst Egrag Crypto, XRP’s price “must maintain” the support at $2.30, aligning with the H&S neckline, to prevent a slide toward these targets.
Related: XRP price trajectory to $3.40 remains intact — Here is the rationale
The analyst provided a chart illustrating that a plunge beneath $2.30 could provoke a considerable sell-off, with the initial target approximately $2.15, dropping as low as $1.60 thereafter.
XRP open interest declines $1 billion in 5 days
XRP open interest (OI) has fallen by 18% to $4.49 billion over the past five days. This drop in OI indicates diminished trader confidence and liquidity, which tends to depress prices.
The recent decline in XRP’s value has also caused liquidations over the past day, with long positions worth $12 million being forcibly closed, compared to just $1.4 million in shorts.
This reflects intensified selling pressure as bullish traders are compelled to liquidate at a loss, further dragging prices down.
Notably, XRP’s 3% decline in the last 24 hours is paired with a 70% surge in daily trading volume to $4.1 billion. An increase in trading volume during a price drop can be interpreted as growing bearish momentum or repositioning by crypto traders as they anticipate XRP’s next move.
This article is not a source of investment advice or recommendations. Every investment and trading decision carries risk, and readers should perform their own analysis prior to making a choice.