XRP’s Bearish Head-and-Shoulders Pattern Signals Trouble

XRP is flashing bearish warning signs as a classic head-and-shoulders (H&S) pattern confirms on its short-term chart, hinting at a potential price drop to the crucial $2 support level. The bearish setup coincides with a sharp decline in XRP futures’ open interest, declining trader confidence, and significant long position liquidations.

The H&S pattern, spotted on the four-hour timeframe since 9 May, is often seen as a reversal signal indicating a shift from bullish to bearish sentiment. This pattern comprises three peaks: a central higher peak (the “head”) flanked by two smaller peaks (the “shoulders”). The pattern is considered validated when the price breaks below the “neckline,” which connects the troughs of the shoulders.

In XRP’s case, the neckline at $2.33 was breached and confirmed during early Asian trading hours on 19 May, setting the stage for further losses.

XRP Could Fall by 14% Following Pattern Confirmation

With the neckline broken, the technical projection points towards a price target of $2.00, a 14% drop from current levels. The first support to watch lies around $2.25, which aligns with the 200-day simple moving average (SMA). If this level fails to hold, bears could take XRP as low as the $2 mark.

Market analyst Egrag Crypto has warned that XRP “must hold” the $2.30 support, also the neckline of the H&S pattern, to prevent deeper losses. He further suggests that a failure at this level could invite a wave of selling, potentially pushing XRP to $2.15 initially, and then even lower to $1.60.

Open Interest Drops Sharply, Signalling Weak Trader Confidence

One of the most concerning metrics for XRP right now is its futures open interest (OI), which has dropped by $1 billion, or 18%, in the past five days. The total OI now stands at $4.49 billion. This sharp decline reflects reduced trader participation and waning confidence in the token’s short-term prospects.

Falling OI generally indicates traders are exiting positions, which reduces market liquidity and can accelerate price movements, particularly on the downside when sentiment is weak.

Long Liquidations Accelerate XRP’s Decline

In the past 24 hours alone, XRP saw $12 million worth of long positions liquidated, compared to only $1.4 million in short positions. This imbalance illustrates how bullish traders are being forced to sell at a loss, increasing selling pressure and contributing to the downward momentum.

Such liquidation events typically cause further price declines, especially when they occur during key technical breakdowns like the recent neckline breach.

Trading Volume Surge Reflects Bearish Sentiment Shift

Interestingly, while XRP’s price has dropped by 3% in the last 24 hours, its trading volume has surged by 70%, reaching $4.1 billion. Increased trading volume during a downtrend often signals growing bearish sentiment, as more traders either cut their losses or position themselves for further declines.

This spike in volume suggests that market participants are either repositioning cautiously or bracing for XRP’s next major move, which, according to current technical indicators and market data, appears likely to be downward.

Conclusion

The convergence of a confirmed head-and-shoulders pattern, falling open interest, increased liquidations, and heightened trading volume paints a bearish short-term outlook for XRP. The critical level to watch remains the $2.30 support. A sustained break below could send XRP towards $2.00 or even lower, should bearish momentum persist. Traders and investors are advised to exercise caution as XRP navigates this technically vulnerable phase.