XRP has recently experienced a significant boost, soaring 26.50% within just 24 hours to reach an impressive $1.95. This price level marks the highest the cryptocurrency has seen since April 2021, igniting excitement among traders and investors alike. A surge triggered by rumors of the New York Department of Financial Services (NYDFS) potentially approving Ripple’s RLUSD stablecoin in December has fueled this rally. However, technical indicators suggest that this bullish trend may soon face a correction.
As XRP approaches a crucial resistance level within its ascending channel, the market is showing signs of exhaustion. The Relative Strength Index (RSI) on the 4-hour chart indicates that XRP is in overbought territory, peaking above 80. Historically, such high RSI readings signal a potential decline in price, suggesting that traders should be vigilant. A correction of approximately 20% could see XRP testing support levels at $1.75 and even down to $1.48, which aligns with the 50-EMA.
Adding to the bearish sentiment, on-chain data reveals that XRP whales holding significant amounts of the token are beginning to sell. Addresses holding at least 100,000 XRP have decreased their balances, indicating that large investors are taking profits as prices soar. This behavior has accompanied XRP’s rise to its recent local highs, raising concerns about potential downward pressure stemming from profit-taking.
The derivatives market for XRP has also seen a drastic increase, with open interest rising by 37% within 24 hours, now standing at a record high of $3.19 billion. Such heightened speculative activity raises the risk of long liquidations, especially if XRP experiences a sharp price drop. If many over-leveraged traders hit their liquidation points simultaneously, this could trigger a wave of selling, further accelerating the decline in price. Analysts have noted similar conditions in the past that led to price corrections.
As we look forward to December, the dynamics surrounding XRP appear complex. While the current highs may provide an opportunity for bullish traders, caution is advised given the indicators pointing toward a probable correction. It’s essential for investors to conduct thorough research and assess their risk tolerance before making any trading decisions in this volatile market.
