XRP has been experiencing a significant surge in January 2025, gaining nearly 50% and peaking at $3.39 on January 18. However, recent technical indicators suggest that this rally could be losing steam. A bearish divergence has started to form between XRP’s price action and its Relative Strength Index (RSI), signaling a potential correction. This pattern mirrors a situation seen in 2018, which preceded a steep 80% drop in XRP’s price, raising concerns that a similar pullback could occur in the near future.
The primary concern stems from the ongoing price increase, with XRP hitting multi-year highs while the RSI, a momentum oscillator, trends lower. This discrepancy suggests that the bullish momentum may be weakening, and a reversal could be approaching. The declining RSI indicates that buying pressure is diminishing, which often results in a shift toward selling as market participants take profits, contributing to a possible price decline.
As of January 18, XRP is trading well above its 50-day exponential moving average (EMA), a critical support level. The 50-day EMA currently sits at $2.28, which is roughly 25% below XRP’s current price of $3.07. In previous instances of overextended rallies, the price has tended to pull back to test its EMA as the market seeks equilibrium. Such corrections are typical in highly volatile markets like cryptocurrency, where significant gains are often followed by profit-taking and consolidation.
In addition to the bearish divergence, XRP’s RSI reading of 66.87 is approaching the overbought threshold of 70. While it’s not yet overbought, the RSI’s downward trend suggests that the buying pressure is starting to fade. This could pave the way for a pullback toward the $2.28 support level, as investors begin to scale back their positions and look for more favorable entry points.
Despite these short-term concerns, XRP’s long-term outlook remains optimistic, supported by the growing interest in its ecosystem and the potential of spot XRP exchange-traded funds (ETFs) in the United States. Analysts suggest that the approval of these ETFs could bring substantial capital into the XRP market, potentially attracting billions of dollars in institutional investments. This could provide further upward momentum for the cryptocurrency, although the immediate technical indicators suggest a possible short-term dip.
XRP’s price movement has also been influenced by its current bull flag pattern, a technical setup that typically forms after a strong upward trend. The price consolidates within a downward-sloping parallel channel before eventually breaking higher. If XRP holds above the upper trendline of the bull flag, it could aim for an upside target of $4.42, a 40% increase from current levels. However, if the price fails to maintain this support, it could invalidate the bullish pattern and trigger a more significant correction.
Should XRP break below the flag’s upper trendline, the next key support level would be around $1.90, which previously acted as a strong barrier in December 2024. A break below this level could suggest further downside potential, potentially driving XRP toward the 200-day EMA near $1.35.
In conclusion, while XRP’s immediate price action faces resistance, its long-term prospects remain positive, especially with upcoming developments like the potential approval of XRP ETFs. However, traders should remain cautious of the short-term risks and closely monitor key levels to gauge whether the current bullish trend will continue or if a correction is imminent. The coming weeks will be crucial in determining XRP’s next move.
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