XRP, the native cryptocurrency of Ripple, has recently experienced its first major pullback since November. After reaching an 8-month high of $2.90 in early December, the cryptocurrency saw a sharp decline, dropping to as low as $1.90. This marks a 20% pullback from its peak, leaving many investors wondering whether this is a temporary correction or the beginning of a larger trend. Let’s examine the key price levels and market dynamics that could guide XRP’s next move.

The Price Pullback: A Sign of Profit-Taking?

XRP’s recent rise was fueled by bullish momentum that carried it to an 8-month high at the beginning of December. However, the rally began to lose steam, with traders opting to take profits after the impressive gains. The sharp correction has left XRP trading at $2.31 at the time of writing, showing a recovery from its low of $1.90 reached earlier in the week.

The pullback in price suggests that XRP is currently in a consolidation phase after the strong bullish push. To better understand the potential for further movement, traders are looking at key technical indicators, such as Fibonacci retracement levels. These levels suggest that the price could drop further, potentially finding support between $1.41 and $1.69, marking significant potential support zones.

Market Sentiment: Shifting from Greed to Fear

The recent price drop coincides with a shift in market sentiment, with traders moving from greed-driven buying to a more cautious, fear-based outlook. This change in sentiment is contributing to sustained sell pressure on XRP. As the fear sentiment grows, the risk of further downward pressure on the price increases.

One of the key indicators of this shift is the behavior in the XRP spot flows. At the start of December, XRP saw significant inflows, peaking at 177.33 million on December 1. However, by December 10, these inflows had decreased dramatically, with the most recent inflow recorded at just $11.35 million. In addition, the cryptocurrency experienced a surge in outflows, which peaked at $155.79 million on December 4. This shift from inflows to larger outflows is a sign of the cooling demand and increasing sell-off.

Derivatives Market Shows Bearish Trends

The derivatives market for XRP is also reflecting a shift in sentiment. On December 11, Coinglass data revealed a spike in negative funding rates for XRP, indicating a rise in short-selling activity. This suggests that bearish expectations are taking hold among market participants, further adding to the downward pressure on the cryptocurrency.

The rise in negative funding rates comes after days of declining positive funding rates, signaling that the earlier bullish demand has begun to cool off. With more traders betting against XRP, the potential for further downside is growing.

What’s Next for XRP?

Given the current market trends, it’s important for traders and investors to stay vigilant. XRP’s price could continue to face downward pressure if the trend of increasing outflows and short-seller dominance persists. The price could eventually find support within the $1.41–$1.69 range, but if negative sentiment continues to build, a further decline could be on the horizon.

However, XRP is known for its volatility, and unexpected events can quickly change market dynamics. Traders should be on the lookout for any news or developments that could reignite bullish demand, such as regulatory updates or positive shifts in market sentiment. As was the case earlier in the week, sudden liquidations and volatile movements could still lead to significant price fluctuations.

Conclusion: A Crucial Time for XRP Traders

The recent pullback in XRP’s price highlights the cryptocurrency’s current struggle between profit-taking and sustained bullish momentum. With the market showing signs of cooling off and increasing sell pressure, traders should monitor key price levels, such as $1.41–$1.69, for potential support. In the meantime, the focus will be on whether demand picks up or if bearish sentiment will continue to dominate XRP’s market in the days ahead.