Is XRP facing the risk of falling once again?

XRP has recorded an impressive recovery of over 45% since the bottom on April 7, rising to trade around $2.31 on May 28. However, this altcoin is still 31% away from the peak in January 2025 ($3,40), leaving many investors skeptical about the next growth momentum.

Is this just a short-term technical bounce, or is XRP preparing to enter a new bull cycle? Could the price reverse in the coming days?

Derivative data shows a bearish trend

One of the clearest signals that XRP may soon enter a difficult phase is the simultaneous weakening of the funding rate and the open contracts (OI) in the futures market.

Funding rate – is the periodic payments between the buyer (Long) and the seller (Short) in perpetual futures contracts – designed to keep the contract price close to the spot price. When this rate fluctuates around 0%, it reflects a balance between buying and selling pressure, while also indicating that market sentiment is in a waiting state and lacks clear direction.

Since February, the funding rate of XRP has been almost unchanged from the 0% threshold, indicating that traders are hesitant and lack confidence in a strong trend coming up. In this context, the price of XRP is likely to continue moving sideways or consolidating due to the lack of clear breakout momentum.

! Funding rate of XRP perpetual futures on all exchanges | Source: GlassnodeMore notably, XRP's open contracts – representing the total value of outstanding positions – fell to $3.2 billion, 9.6% lower than the three-month peak of $3.52 billion set on May 13. History shows that when OI declines, the bullish momentum is often difficult to maintain, as capital flows and investor interest are weakening.

The open interest of XRP futures contracts | Source: GlassnodeFor XRP, this means that just a small selling pressure can trigger a domino effect of liquidating highly leveraged positions, causing the price to plummet rapidly.

If there is no return of funds from institutional investors or retail investors, XRP is at high risk of sliding deeper into a downtrend.

Institutional investors reduce risk with XRP investment products

The demand for investment from institutional investors in XRP is showing a significant decline, according to the latest data from CoinShares.

In the past week, the swap trading products (ETP) related to XRP recorded the strongest capital outflow in the market, reaching up to 37.2 million USD. This is the first week after a series of 80 consecutive weeks where XRP recorded positive cash flow – a noteworthy negative turning point. Specifically in this month, the total capital outflow has reached 28.6 million USD.

! Cash flows into crypto investment products | Source: CoinSharesCoinShares did not give a specific reason for the wave of capital withdrawals from XRP, especially when large-cap digital assets such as Bitcoin, Ether and Solana are attracting strong cash flows. In the past week, these three coins recorded inflows of $2.9 billion, $326 million and $4.3 million, respectively.

This development reflects the change in the risk appetite of institutional investors, indicating a marked cautious sentiment towards XRP – a factor that could exert negative pressure on the price of this coin in the near future.

The descending triangle pattern suggests a potential further decrease of 16%

On the four-hour timeframe, the price of XRP is moving within a descending triangle pattern, formed since May 14. This pattern is defined by a fixed horizontal support line at the bottom and a downward sloping resistance line at the top, indicating a gradual tightening of the price range.

A descending triangle is a technical pattern that often appears after strong price increases, signaling the potential for a reversal in a negative direction. According to technical analysis theory, this pattern will be confirmed when the price breaks below the support line and continues to decrease by an amount equivalent to the maximum height of the triangle.

! XRP/USDT 4-hour chart | Source: TradingViewCurrently, buying is showing signs of weakening as the bulls struggle to maintain price above the 200-day (SMA) simple moving average, which is located in the $2.18 area. If this trend continues, a close below the 200-day SMA — currently at $2.31 — could trigger selling pressure, dragging the XRP price back towards the lower support line of the triangle at the $2.28 mark.

If this key support level is broken, the downward momentum could accelerate, bringing XRP down to the target area around $1.96 by the end of May — corresponding to a decline of nearly 16% from the current price.

Notably, the technical target of this descending triangle pattern also aligns with previous analyses, which warned of the possibility that the price could continue to adjust further down to $1.61 if key support levels are not maintained.

Conversely, if the bulls succeed in pushing the price clearly above the upper resistance line of the triangle — currently coinciding with the 50-day SMA around $2.35 — then the bearish structure will be invalidated. At that point, XRP could open up recovery opportunities towards the important psychological level of $3.

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