XRP price has set in motion a bearish outlook that could push it back to levels in December 2020
XRP price has set a bearish outlook that could push it back to levels last seen in December 2020 and during the COVID 2020 crash; therefore, investors need to be cautious towards Ripple.
XRP/USD 4-hour chart | Source: TradingView
XRP price not reaping benefits
XRP price action since March 29 has produced four lower highs and higher lows, which, when connected using trendlines, indicate the formation of a symmetrical triangle, a pennant. This setup essentially converges between the two trend lines, squeezing the price. After a certain point, the rollback breaks out into a volatile move.
Unlike other setups with bias, pennants can be broken in two ways. This technical formation forecasts a 69% move, which is determined by adding the distance between the high and low of the first swing to the breakout point.
Although XRP price settled in a bullish move after the last three retests of the lower trendline, the latest tag nonetheless resulted in a bearish move. When the crypto market crashed on May 5, XRP price followed suit, breaking the pennant’s lower trendline at $0.575.
Adding the forecast measure to this breakout suggests a target of $0.176. However, unlike many altcoins, the XRP price has maintained its upward momentum and has not suffered a rapid decline. So, there is hope for the bulls if there is a quick bounce above the lower trendline.
However, a crash could crash the remittance token down to $0.330. A break of this barrier will bring the price of XRP to the forecast target of $0.176.
Source: TradingView, XRP/USDT 3-day chart
Supporting this potential downward move in XRP price is a 365-day Market Value to Real Value (MVRV) model. As explained in previous articles, this indicator is used to gauge the sentiment of holders by measuring the average profit/loss of investors who have purchased XRP tokens over the past year.
Generally, a negative value indicates that these holders are underwater, and therefore a sell-off is unlikely. However, a positive value indicates that holders are in profit, which increases the likelihood of a crash.
Based on XRP historical data, the 365-day MVRV is hovering around -38%, a well-known support level and has served as the basis for reversal moves. However, second support at -50%, which caused a trend change in December 2018, March 2020 and December 2020.
Therefore, a chance of a drop lower remains in the cards for XRP price, which supports the bearish outlook depicted from a technical point of view.
- Ripple Has Finally Taken The Gloves Off In Its Legal Face Off Against SEC?
- SBI Motor Japan Accepts XRP Payment, Will XRP Get Push Adoption In Asia?