XRP Faces Bearish Trend With 30% Drop Risk As Support Breaks

Ripple's XRP has developed a traditional bearish pattern, known as a head-and-shoulders formation, which signals an impending bearish trend. The main support level for this pattern is at $2.05. A breakdown below this level could lead to a rapid depreciation, pushing XRP prices towards the $1.30-$1.20 region, which aligns with a previous turning point. However, if XRP manages to sustain above $2.05, it could delay the bearish breakdown, with brief upward movements potentially occurring between $2.40 and $2.60 before the price continues its descent.

The bearish pattern is further supported by an increase in cumulative long liquidation leverage value to $46.4 million at the $2.20 zone. This high point of forced liquidations among long traders reinforces the rising sell pressure in the market. Additionally, leveraged short positions have been increasing, indicating mounting negative sentiment and a higher probability of a continued downtrend. XRP at $2.245 struggled to break support, which could trigger liquidations and push the price to $2.10 or lower. Once XRP hits the $2.20 liquidity zone, liquidations could aggressively wipe out leveraged traders, accelerating the price decline.

Stablecoin reserves on all exchanges reached $32.8 billion in 24 hours, indicating that multiple market participants were selling their holdings for profits. This strong selling pressure is more likely due to diminishing bullish indicators. The increasing reserve holdings of stablecoins could trigger XRP prices to break through its support at $2.05. A failure to defend this support level would lead to the price dropping between $1.30 and $1.20.

Despite the bearish sentiment, there are some bullish indicators. The crowd sentiment reached a value of 0.81 while smart money sentiment stood at 1.21, suggesting that retail and institutional traders have a preference for ascending price movement. However, these indicators might not be sufficient to alter the bearish conditions, as smart money frequently uses manipulation to lure investors ahead of significant price drops. XRP failing to break resistance may trigger a liquidity sweep, pushing prices down until experienced traders exit before market expansion starts. Market sentiment showed optimism, although additional price drops remained likely because of liquidation risks.

If XRP can break above $3, it will invalidate the current head-and-shoulders pattern, potentially flipping the outlook to bullish. XRP price could test this point as resistance at $3.40 and $3.60 before it displays increased upward movement potential. The upcoming trading sessions could prove essential because continuous bulk buying is needed to both cancel the bearish pattern and validate exceeding important resistance levels. XRP’s flip to bullish is hindered as stablecoin reserves across exchanges increased, signaling profit-taking in the market.