XRP's Path Out of the Descending Channel: Is 2026 the Year of Reversal?

The XRP price narrative in late 2025 has been defined by a rigid descending channel, with sellers maintaining control despite surging institutional demand. As the asset consolidates near $1.85–$1.87, the question looms: Can 2026 mark a reversal, or will the bearish structure persist? This analysis examines technical and on-chain signals to evaluate the likelihood of a breakout or breakdown.

Technical Analysis: A Bearish Channel with Flickers of Hope

XRP's price action since October 2025 has been confined within a descending channel, defined by lower highs and a critical resistance line near $2.10–$2.15. Repeated failures to breach key resistance levels-$1.93 and $2.05-have reinforced bearish momentum, with the MACD and RSI trending downward. The $2.03 level now acts as a pivotal threshold: a breakdown below this could trigger a retest of support zones at $1.60 and $1.25, while a sustained close above $2.10 might signal a trend reversal toward $2.70.

On the weekly chart, XRP hovers near the bottom of a descending triangle pattern, with a close below $1.81 potentially confirming a breakdown. However, institutional demand via U.S. spot XRP ETFs has injected $1.15 billion in inflows by December 2025, suggesting structural buying pressure. This dynamic creates a paradox: while technical indicators lean bearish, the accumulation of ETF assets hints at a potential catalyst for a 2026 rebound.

On-Chain Metrics: Accumulation Amid Volatility

On-chain data reveals a mixed picture. The XRP Ledger's active address count hit 295,000 in December 2025-the highest level of the year-indicating robust user activity. Meanwhile, whale wallets holding 1 million or more XRP reached an all-time high of 2,700, with holdings valued at $2.25 million minimum, signaling institutional confidence.

Exchange balances for XRP have plummeted to an eight-year low, with a 58% drop in 2025. This suggests strong accumulation by retail and institutional investors, though the price remains below $2. The velocity metric (0.0324) also spiked, reflecting increased circulation of XRP among investors rather than long-term storage.

However, the NVT ratio tells a conflicting story. While a 5-month low in the NVT ratio suggests undervaluation relative to transaction activity, a recent spike has raised concerns about overvaluation due to a mismatch between rising market cap and utility. This divergence underscores the asset's precarious balance between hype-driven buying and fundamental growth.

Bullish vs. Bearish Scenarios for 2026

Bull Case:
- ETF Momentum: XRP ETFs have attracted $1.17 billion in cumulative inflows, with estimates suggesting they could approach $5 billion if the trend continues. This structural demand could eventually drive a breakout above the descending channel.
- On-Chain Accumulation: The shrinking cohort of large wallets (down 20.6% over eight weeks) and rising whale holdings indicate a shift toward concentrated ownership, often a precursor to price action.
- Regulatory Clarity: The CLARITY Act's passage in 2025 has reduced regulatory uncertainty, potentially spurring enterprise adoption and broader market participation.

Bear Case:
- Failed Breakouts: XRP's inability to reclaim $2.05 and $2.10 has entrenched bearish sentiment, with the RSI and MACD showing no signs of reversal. A breakdown below $1.81 could expose $1.68 and $1.25.
- Supply Overhang: The January 2026 escrow unlock introduces a liquidity risk, even if Ripple historically relocks most of the unlocked XRP. Thin liquidity could amplify volatility during this period.
- NVT Divergence: The conflicting signals from the NVT ratio highlight a disconnect between price and utility, raising questions about the sustainability of current inflows.

Conclusion: A Tenuous Setup for 2026

XRP's path in 2026 hinges on two critical factors: the resolution of the descending channel and the sustainability of ETF-driven demand. While technical indicators remain bearish, on-chain metrics suggest a market in accumulation. A breakout above $2.10 could reignite bullish momentum, but a breakdown below $1.81 would likely deepen the bearish narrative. Investors must monitor key levels and the interplay between institutional inflows and on-chain activity. If history repeats itself-mirroring XRP's explosive rallies in 2018 and 2024-2026 could indeed be the year of reversal. However, patience and caution remain warranted in a market still defined by sellers.