XRP price is down today as profit-booking and overheated conditions could lead to a deeper correction in the short term.
XRP XRP $ 2.42 soared past the $2.80 mark on Dec. 2, hitting a near six-year high of $2.90 amid anticipation of a favorable regulatory environment for cryptocurrencies under Donald Trump’s administration and the potential resolution of Ripple’s long-standing legal battle with the US Securities and Exchange Commission (SEC).
XRP price has, however, pulled back significantly since, leading to questions about whether $2.90 was the top, at least for now. The price of the remittance token is down 5% over the last 24 hours to trade at $2.45.
Let’s look closer at the factors driving XRP price down today.
Profit-taking slows XRP’s momentum
XRP is up more than 340% over the last 30 days, putting many tokenholders in profit, according to onchain data from Santiment. This has exerted high selling pressure in the market, pointing to a continued correction over the next few days.
The Network Realized Profit/Loss (NPL) indicator shown in the chart below suggests that holders booked profits following XRP’s run to $2.90. The NPL indicator spiked between Dec. 1 and Dec. 3, indicating that many holders sold their tokens at significant profit levels.
A similar spike was witnessed on May 1, 2021, after a month-long rally, which preceded a 35% correction over the two weeks that followed. XRP could see a similar drop over the next few weeks if history repeats itself.
The drawdown in XRP price also comes after the Dec. 4 announcement by Ripple that it was postponing the launch of its stablecoin, $RLUSD, citing delayed regulatory approval from the New York Department of Financial Services.
This announcement was a setback for investors who had pinned hopes on the stablecoin’s launch to accelerate the growth of XRP price. Touted as the cornerstone of Ripple’s On-Demand Liquidity (ODL) platform, $RLUSD is expected to play an important part in cross-border payment operations alongside XRP.
XRP price correction follows overbought conditions
The relative strength index (RSI) shows that XRP was massively overbought on multiple timeframes following its run to $2.90. Currently, the RSI is 84 on the weekly chart, sloping downward to suggest a weakening bullish momentum.
The $2.60 level continues to hold as resistance, and if bulls cannot flip it into support, XRP could extend the decline to retest the important level of $2.20.
Lower than that, the price may drop to collect the demand side liquidity before finding support between the $1.60 and $1.40 range.
These support areas, however, could provide perfect opportunities for traders to buy more at a discount, according to Market analyst EGRAG.
EGRAG says that the current market correction offers attractive opportunities for XRP investors. He points to $2.0 as a significant buying level, with the $1.60 to $1.70 range identified as another potential accumulation zone, particularly if XRP/USD experiences a price correction due to a rounding top pattern.
“At the $2.00 mark – Go heavy! At the $1.60–$1.70 zone – If we get a Rounding Top pullback, this could be a golden entry.”
A successful breakout from the rounding top formation could push XRP beyond the $3.50 to $3.80 range, setting the stage for a rally targeting $6 to $8 in the short term, according to EGRAG.
Risk Disclaimer
Although Sponsored Trading can be profitable, it is associated with a significant risk of losing your investment. The risks will increase when trading on margin companies. Traders must exercise due diligence and be careful when making their trading decisions. It is the sole responsibility of the Trader to learn and acquire the knowledge and experience required to use the Trading Platform and anything that will be required to trade properl
