XRP Analysis: Is Profit-Taking and Bearish Sentiment Driving a Pullback?

XRP has experienced a pullback following its meteoric rise over the past month. 

XRP reached a high of $2.71 earlier in December before retracing to $2.45 as of press time, marking a 4.19% decline in the past 24 hours. 

Despite this decline, XRP still shows a 0.72% increase over the past week. This price movement follows a massive rally in which XRP quadrupled its value from early November to December, which may have triggered profit-taking among traders.

Santiment’s Network Realized Profit/Loss (NPL) indicator shows that many holders booked profits near the recent peak. 

On December 1, the NPL metric spiked, suggesting a wave of profit-taking. A similar spike was observed in May 2021, after which XRP saw a 35% correction over two weeks. 

Historical trends suggest a potential for further pullbacks as traders lock in profits after significant price surges.

Source: Santiment

Bearish Sentiment in the Market

Data from Coinglass reveals that XRP’s long-to-short ratio is 0.85, the lowest in a month. This indicates a bearish sentiment, as a ratio below 1.0 shows that short positions outnumber long positions in the market. 

Source: Coinglass

The increasing bearish positions align with the ongoing price retracement and suggest that traders are anticipating further downside.

Additionally, technical indicators reflect waning bullish momentum. The MACD, while still positive, is narrowing, and the RSI has fallen to 69.40, just below overbought levels. 

Source: TradingView

These factors point to a cooling-off period for XRP as momentum slows and bearish sentiment gains traction.

Historical Patterns and Short-Term Risk

Ripple’s price history suggests that large-scale rallies are often followed by corrections, a trend that appears to be repeating now. Profit-taking and bearish sentiment have historically played pivotal roles in such pullbacks. 

As seen in May 2021, a correction followed a similar rally, suggesting that XRP may face further downside pressure if historical patterns persist.

The pullback is also consistent with broader market dynamics, where rapid price increases are often met with profit-booking by traders. This short-term risk could result in XRP testing lower support levels in the coming days, particularly if bearish sentiment continues to rise.

Flare Network’s Development Timeline and Its Influence

Adding to the current market dynamics is the announcement from Hugo Philion of Flare Networks about the rollout of FAssets, starting with FXRP. While this development has long-term implications for XRP’s utility, the news does not appear to have immediately bolstered prices, suggesting that current price movements are more influenced by technical and sentiment factors.

Flare’s testing of FXRP on Songbird is scheduled for late 2024, with a mainnet launch in early 2025. 

Though promising for XRP’s ecosystem, the timeline means it is unlikely to provide immediate support for XRP’s price amid the current pullback.

FAQs:

Why is XRP seeing a pullback?

Profit-taking and bearish sentiment, shown by the NPL metric and short positions, are driving the pullback.

What do technical indicators suggest?

Narrowing MACD and RSI at 69.40 indicate slowing bullish momentum and potential further correction.

Will Flare Network developments affect XRP now?

Unlikely, as Flare’s FXRP testing on Songbird is planned for late 2024, with a mainnet launch in 2025, making it a long-term factor.