XRP may be poised for a significant downturn as technical and on-chain indicators flash red. A classic head-and-shoulders (H&S) pattern, combined with a sharp decline in futures open interest and increased selling pressure, suggests the cryptocurrency could revisit the $2 mark in the near term.
Bearish Head-and-Shoulders Pattern Confirmed
XRP has formed a head-and-shoulders pattern on the four-hour chart since May 9. This well-known technical formation is typically a bearish reversal signal, indicating that the asset may be shifting from an uptrend to a downtrend. The pattern comprises three peaks: a central high point (the head) flanked by two lower peaks (the shoulders).
The pattern was confirmed in the early Asian trading hours on 19 May when XRP broke below the neckline—an imaginary line connecting the lows of the two shoulders—at $2.33. This breakdown suggests a potential 14% drop from current levels, projecting a downside target of $2.00.
XRP/USD four-hour chart.
If XRP remains below the neckline, analysts expect it could first slide to the 200-day simple moving average at $2.25, before falling further to the $2.00 target zone.
Key Support Levels in Focus
Crypto analyst Egrag Crypto emphasised the importance of holding the $2.30 level to avoid further declines. According to him, a breach below this support could open the door for a major sell-off. His chart indicates the next key support levels lie around $2.15 and $1.60, should bearish momentum intensify.
The recent price action aligns with this caution. XRP has already fallen by 3% in the last 24 hours, raising alarm among bullish traders who were betting on an upward move.
Open Interest Drop Reflects Weakening Confidence
Further reinforcing the bearish outlook is a notable drop in XRP futures’ open interest (OI). Over the past five days, OI has plunged by 18%, wiping out $1 billion and bringing the total to $4.49 billion. This steep decline suggests reduced trader participation and fading confidence in XRP’s short-term prospects.
Open interest represents the total number of active derivatives contracts. A decrease in OI typically signals that traders are closing their positions, which can lead to reduced market liquidity and greater price volatility.
Spike in Liquidations Highlights Selling Pressure
In the same period, long positions worth $12 million have been liquidated, compared to just $1.4 million in shorts. This imbalance underscores the heightened selling pressure in the market, as bulls are forced to sell at a loss due to margin calls or stop-loss triggers.
Such liquidations tend to exacerbate downward momentum, especially when they occur in tandem with technical breakdowns like the H&S pattern. Traders rushing to close positions add fuel to the decline, creating a feedback loop of bearish sentiment.
Trading Volume Surges as Price Declines
Interestingly, XRP’s 3% drop was accompanied by a 70% surge in daily trading volume, which now stands at $4.1 billion. Rising volume during a price dip can signal growing bearish momentum, as more traders enter the market expecting further downside.
Source: Egrag Crypto
It can also indicate a repositioning phase, where traders adjust their strategies and wait for clearer signals about XRP’s next move. However, in this context, the spike in volume supports the overall bearish narrative.
Outlook: All Eyes on $2 Support Zone
XRP’s price action suggests that a retest of the $2 level is becoming increasingly likely unless bulls regain control and reclaim the $2.30 support zone. With open interest falling, liquidations rising, and trading volume climbing amid declining prices, the path of least resistance appears to be downward.
Market participants will closely monitor XRP’s behaviour around $2.25 and $2.00 in the coming days. A sustained drop below $2 could trigger further technical selling, while a strong rebound above the neckline would be needed to invalidate the bearish setup.
