XRP Dumps: Negative Funding Signals Trouble

What to Know:

• XRP has entered an “air pocket” on its weekly chart, leading to steeper declines amid broader market selling pressure.
• This situation occurs within a broader context of Bitcoin’s significant realized losses and a general downturn in the crypto market.
• The drop below a key support level matters for XRP and Ripple, as it highlights potential further downside risk and the importance of identifying the next support levels.

The crypto market is experiencing a fresh wave of selling pressure, impacting assets across the board. Bitcoin’s recent capitulation event, marked by substantial realized losses, has dragged down the market, including XRP. As a result, XRP has slipped into what market analyst Scott Melker calls an “air pocket,” a zone with minimal buying support, exacerbating its price decline.

Broader Market Downturn

Investor confidence has taken a hit as the market grapples with renewed selling pressure. Bitcoin’s fall below $65,000 marks a significant downturn, with a nearly 26% drop year-to-date. This decline is indicative of broader macro concerns impacting risk assets, including digital currencies. The global crypto market cap has shrunk considerably, reflecting the widespread impact of this downturn.

XRP’s Technical Position

XRP’s performance has contributed to the overall market decline, with a notable year-to-date decrease. While it has shown relative resilience compared to Ethereum, it has underperformed against other major altcoins like BNB and Cardano. The technical setup, particularly the breach of the $1.61 support level, has placed XRP in a precarious position. This level had previously acted as a buffer during market corrections, but its failure to hold now signals potential further downside.

The “Air Pocket” Effect

The concept of an “air pocket” is crucial in understanding XRP’s recent price action. An air pocket signifies a zone where there’s a scarcity of buy orders, leading to rapid price declines due to the absence of support. Scott Melker’s analysis suggests that XRP’s descent into this zone explains its accelerated downward movement compared to other cryptocurrencies. This situation underscores the importance of liquidity and order book depth in determining price stability.

Potential Support Levels

Looking ahead, the 200-week moving average (MA) at $1.1 is being eyed as the next potential support level for XRP. However, caution is warranted, as this moving average has failed to provide adequate support for other altcoins recently. The ineffectiveness of this level for assets like Ethereum and Solana raises concerns about its reliability for XRP. This suggests that stronger support may lie below the $1 psychological level, a level XRP hasn’t visited since its November 2024 rally.

Navigating Uncertainty

The current market conditions highlight the inherent volatility and uncertainty in the crypto space. While technical analysis can provide insights into potential support and resistance levels, the dynamic nature of the market means that these levels can be easily breached. Institutional investors should remain vigilant, closely monitoring market structure, order book dynamics, and macroeconomic factors to navigate these turbulent times.

XRP’s drop into an “air pocket” underscores the challenges of navigating volatile crypto markets. While potential support levels exist, their reliability is uncertain, necessitating a cautious approach. Investors should focus on risk management and be prepared for potential further downside before a true bottom can be established.

Related: XRP Plunges: Index Shows Negative Signals

Source: Original article