The cryptocurrency market is currently facing a downturn, and XRP (XRP) is not immune to the impact. After reaching an all-time high of $3.40 in mid-January, XRP has experienced a significant drop, now trading around $2.20. This drop, which represents a 35% decline over the past two months, has raised concerns among investors about the future of the token. As the crypto market experiences broader market-wide losses, the big question remains: can XRP bounce back to $3, or will it crash to $1.50?

Market Factors Affecting XRP’s Price

Several key factors have contributed to the current downtrend in XRP’s price. Bitcoin has seen a drop of 4%, and other altcoins, such as Ethereum (ETH), Solana (SOL), and XRP, have also experienced significant losses. The overall market is down by 7%, and the recent market dip is largely attributed to geopolitical factors, such as rising tensions in the U.S.-China trade war, Donald Trump’s executive order preventing taxpayer funds from purchasing altcoins, and a massive $616 million in liquidations, primarily from long positions.

Shrinking Profits and Weak Market Sentiment

XRP has also faced internal challenges, as its price continues to decline. On-chain data reveals that the amount of XRP held in profit has decreased by 6.39 billion tokens in just one week, marking its lowest level of the year. This drop in profitability has resulted in a higher number of XRP holders at a loss, leading to increased selling pressure. This sentiment could drive the price even lower in the short term, as traders may continue to offload their positions.

Decreasing Demand and Lower Investor Interest

One of the key reasons for XRP’s lackluster performance is the noticeable slowdown in new investor demand. According to Santiment, only 4,516 new wallet addresses were created on a recent Sunday to trade XRP. This is the lowest daily count recorded for the year, signaling a drop in fresh investments. A decrease in demand typically leads to slower trading activity, which weakens support for the token. If this trend continues, it will be difficult for XRP to recover and sustain upward momentum in the short term.

Moreover, broader market sentiment is not helping. Morgan Stanley analyst Michael Wilson has forecasted a 5% drop in the S&P 500 in the first half of the year, which could drag XRP and other altcoins lower. As market liquidity tightens, investors may retreat from riskier assets like altcoins, adding to XRP’s downward pressure.

Technical Analysis: Can XRP Break the Bearish Trend?

On the technical side, XRP has been facing significant resistance since its all-time high. The token has been trading below a descending trendline, indicating a bearish pattern characterized by lower highs. As long as XRP fails to break above this descending trendline, it remains vulnerable to further downside pressure.

Currently, XRP is hovering around $2.17, with resistance at $2.93. Should the price fail to break through this resistance, it could continue its downward trajectory. In such a case, the next key support level to watch would be $1.47. If selling pressure intensifies, XRP may test this support level, which could trigger further declines toward $1.50 or lower.

Can XRP Bounce Back?

For XRP to turn around its price decline, it would need a substantial shift in sentiment and strong buying pressure. If XRP can break above the descending trendline, the next major resistance is at $2.93. A breakout above this level could signal a recovery and provide hope for a potential rebound back to $3. However, with demand at a yearly low and bearish sentiment still dominating, XRP faces a difficult battle in the near term.

Unless investor interest picks up and market conditions improve, XRP could remain under pressure, facing the risk of further declines in the coming weeks.

Conclusion: The Outlook for XRP

XRP’s future price action largely depends on external market factors and internal demand for the token. If the broader market downturn continues, and XRP fails to break through key resistance levels, the price could drop further, potentially testing levels as low as $1.50. However, if investor interest picks up and the market sentiment shifts, there is still the potential for a rebound back to $3 or higher.

In conclusion, the short-term outlook for XRP is challenging, with the risk of further losses. However, XRP’s long-term recovery will depend on a variety of factors, including new demand, broader market conditions, and the ability of the cryptocurrency to regain its bullish momentum.