XRP price risks falling to $2 after classic bearish chart pattern confirms

Key takeaways:

• XRP could be headed down to $2 following a breakdown of a classic head-and-shoulders pattern.

• Declining open interest in XRP futures signals weakening trader confidence.

The XRP (XRP) price is flashing warning signs as a bearish technical pattern resolves on lower timeframes, coinciding with massive long liquidations and decreasing open interest.

XRP price action has formed a head-and-shoulders (H&S) pattern on its four-hour chart since May 9, projecting a likely down-move.

The head-and-shoulders pattern is a bearish reversal pattern that can signal a change in trend. It consists of three peaks: a higher peak (head) and two lower peaks (shoulders). 

It is resolved when the price breaks below the neckline (the line connecting the lows of the left and right shoulder), confirming the pattern and suggesting a potential sell signal.

In XRP’s case, the pattern was validated following a break and close below the neckline at $2.33 during the early Asian trading hours on May 19.

If the price stays below the neckline, the XRP/USD pair could slide further to $2.25 (where the 200-day simple moving average currently sits) and then to the pattern target of $2.00. This would bring the total losses to 14% from the current levels.

As Cointelegraph reported, a possible decline to as low as $2.00 is currently in play as bullish momentum has decreased.

For analyst Egrag Crypto, XRP price “must hold” the support at $2.30, which aligns with the H&S neckline, to avoid a breakdown toward these targets. 

Related: XRP price path to $3.40 remains intact — Here is why

The analyst shared a chart showing that a drop below $2.30 could trigger a massive sell-off, with the initial target set around $2.15 and then going as low as $1.60.

XRP open interest (OI) has decreased by 18% to $4.49 billion over the last five days. This decline in OI signals reduced trader confidence and liquidity, which drives prices down.

The latest drawdown in XRP price has also triggered liquidations over the last day, where long positions valued at $12 million were forcibly closed, compared to just $1.4 million in shorts. 

This reflects heightened selling pressure as bullish traders are forced to sell at a loss, pushing prices lower.

Importantly, XRP’s 3% drop over the last 24 hours is accompanied by a 70% increase in daily trading volume to $4.1 billion. Trading volume increases amid a price decline can be interpreted as increasing bearish momentum or repositioning by crypto traders as they wait for XRP’s next move. 

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.