XRP Price Drops to Crucial Support Level, Signaling Potential Declines

XRP retreated on Monday, reaching a crucial support level and signaling the potential for further declines in the coming days. The cryptocurrency dropped to $2.40, down nearly 30% from its highest level this year, officially placing it in a bear market.

Market Weakness and Bearish Signals

The sell-off has coincided with broader weakness in the crypto market, as Bitcoin remained below $100,000. The crypto fear and greed index has fallen to the fear zone at 38, while the altcoin season index has also declined.

Technicals suggest that the XRP price may crash further. The daily chart shows that the price has fallen below the 50-day and 100-day moving averages, a bearish signal indicating that sellers are in control.

Head and Shoulders Pattern and Bearish Breakdown

XRP has formed a head and shoulders pattern, which consists of two shoulders, a neckline, and a head. The price has now dropped to the slanted neckline, aligning with the strong pivot reversal of the Murrey Math Lines.

As a result, a strong bearish breakdown is likely, with the next reference level at $1.79, the lowest swing this month. A move below this level could open the door to further declines, with the next support at $1.6130, corresponding to the 61.8% Fibonacci retracement level.

The bearish outlook would be invalidated if XRP rebounds above the weak stop-and-reverse level at $2.735.

Wyckoff Theory Points to Further Downside

The other risk is that the XRP price has moved into the distribution phase of the Wyckoff Theory. The weekly chart indicates that the coin remained in the accumulation phase for most of last year, characterized by sideways price action.

It then entered the markup phase in November, surging by over 400%. Now, XRP has moved into the distribution phase. A break below the neckline of the head and shoulders pattern would confirm its transition to the markdown phase, which is marked by increased supply, reduced demand, and panic selling among investors.

Possible Bullish Catalysts

XRP price has some possible bullish catalysts that may help it rebound. These include:

  • The decision by the SEC to end the Coinbase and Robinhood lawsuits, which could lead to a similar outcome for Ripple.
  • The rising odds of the Securities and Exchange Commission approving the XRP ETF, which could attract over $8 billion in funds this year.

While these catalysts may provide some support for the XRP price, the overall bearish outlook remains in place.

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