XRP (XRP) bulls should brace for a period of potential price declines in the coming weeks. At least four indicators, including a mix of technical, fundamental, and on-chain metrics hint at downside ahead.

XRP price bear flag setup

The first indicator hinting at a potential downturn for XRP is a bear flag pattern.

A bear flag is a bearish continuation pattern characterized by a small, upward-sloping rectangle formed by parallel lines against the prevailing downtrend. It gets resolved when the price decisively breaks below its lower trendline, and falls by as much as the prevailing downtrend’s height.

As of Jan. 30, XRP is precariously hovering at the lower trendline of its bear flag, signaling a potential breakdown. Concurrently, its weekly relative strength index (RSI) stands at around 40, a neutral territory indicating the scope of possible further declines in the market.

XRP/USD weekly price chart. Source: TradingView

Therefore, a decisive break below the flag’s lower trendline risks positioning XRP’s price for a fall toward $0.24 — down about 55% from current price levels — by May or June.

XRP whales are dumping

XRP is on the brink of a bear flag breakdown, a situation that aligns with the substantial inflow of XRP, worth hundreds of millions of dollars, into Bitstamp and other cryptocurrency exchanges, according to data from Whale Alert.

That includes Ripple’s transfer of $24.75 million worth of XRP tokens into an unknown wallet on Jan. 30. This transfer is likely part of Ripple’s routine operations involving the tokens that are unlocked from escrow each month.

Large XRP transfers to exchanges and unknown wallets. Source: Whale Alert/X

The timing of these substantial XRP transfers to exchanges is noteworthy, as it aligns with a critical shift in the distribution of XRP holdings.

Specifically, there’s a noticeable decrease in the XRP reserves of whales holding between 100 million and 1 billion tokens (the teal wave), alongside increased holdings by entities possessing over a billion tokens (the black wave), which could be crypto exchanges.

XRP supply distribution. Source: Santiment

Following the decline in XRP holdings among the cohort with 100 million to 1 billion tokens, there has been a corresponding uptick in the supply controlled by the group holding 10 million to 100 million XRP (the red wave).

XRP supply distribution. Source: TradingView

This suggests either the selling or redistribution of XRP holdings by whales.

Death cross, head-and-shoulders breakdown

XRP’s selloff risks further increase due to a confluence of two bearish technical setups on shorter-timeframes.

First, XRP’s 50-day exponential moving average (50-day EMA; the red wave) will likely cross below its 200-day EMA (the blue wave), forming a so-called “death cross” that’s seen as a bearish signal by traditional traders and analysts.

For instance, a death cross formed on the XRP daily chart in December 2021 preceded a 65% price decline, as shown below.

XRP/USD daily price chart. Source: TradingView

Second, XRP is painting a head-and-shoulders (H&S) pattern on its daily chart.

H&S is a bullish-to-bearish trend reversal pattern, characterized by a peak (shoulder), followed by a higher peak (head), and another lower peak (shoulder) — all forming atop a common support line called the neckline.

Analysts measure the H&S price target by calculating the maximum distance between the head’s peak and the neckline and extending it downward from the point where the price breaks through the neckline.

Applying the same technical rule on XRP’s H&S brings its price target to about $0.34, down 30% from current price levels, by March or April.

XRP/USD daily price chart ft. H&S breakdown setup. Source: TradingView

No spot XRP ETF in sight

BTC analysts are not too optimistic about a spot XRP ETF happening anytime soon, which could dampen the demand for XRP tokens versus Bitcoin (BTC) and Ether (ETH).

The ongoing lawsuit between Ripple and the U.S. Securities and Exchange Commission (SEC) is a big reason why along with the absence of an XRP futures ETF in the U.S.

Related: Wealth relevant to penalty, SEC says in Ripple financials squabble

Townsend Lansing, head of product at CoinShares, told Cointelegraph that for a spot XRP ETF to be feasible, the SEC must agree that XRP is not a security, a scenario that seems unlikely for the time being.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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