XRP Price Soars to 43-Month Highs, But Is the Rally Over for Now?

XRP has made a remarkable leap, reaching its highest price in over 43 months. On November 30, the cryptocurrency surged 26.5% in just 24 hours, climbing to $1.95, a level not seen since April 2021. This significant rally has been largely driven by rumors that the New York Department of Financial Services (NYDFS) may soon approve Ripple’s RLUSD stablecoin. However, despite the recent price surge, technical indicators suggest that XRP’s rally may be losing steam, and a potential price correction of up to 20% could be on the horizon in December.

Technical Indicators Signal a Possible Correction

Resistance at the Ascending Channel

One of the key factors pointing to a potential pullback is XRP’s position within an ascending channel. On November 30, the cryptocurrency tested the upper resistance of this channel, a move that historically has been followed by price corrections. This pattern has previously been observed when XRP reached similar resistance levels, suggesting that the current rally could be nearing its peak.

Overbought Conditions on RSI

XRP’s Relative Strength Index (RSI) on the 4-hour chart has surged above the 80 mark, entering the overbought territory. An RSI above 70 typically signals that an asset may be overvalued, and at levels above 80, the likelihood of a correction increases. Historical data shows that when the RSI reaches these elevated levels, a price pullback is often imminent. If this trend holds, XRP may face a decline to support levels around $1.75, which aligns with the lower trendline of the ascending channel. A further dip could bring the price down to the 50-EMA (Exponential Moving Average) at approximately $1.48, representing a potential 20% drop from the current price.

Profit-Taking by Whales

On-chain data also suggests that large XRP holders, or "whales," are beginning to take profits as the price nears recent local highs. Whale addresses holding at least 100,000 XRP saw their combined balance peak at 90.73 billion XRP on November 24. Since then, these holdings have decreased by 30 million XRP, signaling that some large investors are choosing to sell at these multi-year highs. This profit-taking behavior could add selling pressure, further contributing to a potential price correction.

The Impact of Overleveraged Positions

XRP’s derivatives market has seen a significant increase in speculative activity. Open interest (OI) in XRP futures and options surged by 37% in just 24 hours, reaching a record high of $3.19 billion. This heightened leverage-driven activity is indicative of growing speculation, but it also raises the risk of long liquidations if the price starts to fall.

Analysts, including JA Maartun from the on-chain data platform CryptoQuant, have pointed out that the increase in open interest resembles the conditions seen before previous price declines, such as the 17% drop between November 23 and 26. When large numbers of leveraged positions are involved, there is a risk of forced liquidations if the price falls to certain levels, potentially amplifying the downward pressure on XRP.

What’s Next for XRP?

While XRP’s price surge has certainly caught the attention of investors, the technical signals suggest that the rally may be running out of steam. With resistance levels at play, overbought conditions on the RSI, profit-taking by whales, and an overleveraged market, cryptocurrency is at risk of correction. Analysts predict that XRP could face a 20% decline in December, with support levels around $1.75 or even $1.48.

As always, traders and investors should be cautious, monitoring market conditions closely to assess whether the bullish momentum can sustain itself or if a pullback is imminent.