XRP Soars Amid Market Hype, But Key Indicator Predicts Trouble

Ripple’s XRP has managed a 3% price increase over the past week, in line with the broader crypto market rally that has lifted several major coins. 

However, despite the bullish momentum, a key technical indicator is flashing a warning signal that could undermine XRP’s recent gains.

XRP’s Rally on Thin Ice

XRP’s Chaikin Money Flow (CMF)—an indicator that measures the volume-weighted flow of money into and out of an asset—has been trending downward even as the token’s price has continued to rise. This momentum indicator is currently at 0.03 and trending toward the center line.

The trend forms a bearish divergence between XRP’s price action and CMF, a warning sign of weakening momentum. Typically, the CMF tracks the flow of capital into an asset, so when it declines while prices rise, it suggests that the rally lacks solid support from sustained demand. 

In other words, XRP traders may be buying based on short-term hype rather than long-term conviction. This means its recent gains are vulnerable to being erased, especially if broader market sentiment shifts or profit-taking sets in. 

Further, the altcoin’s negative Balance of Power (BoP) supports this bearish outlook. As of this writing, the indicator is at -0.76, highlighting the weakening demand for XRP. 

When an asset’s BoP is negative like this, sellers exert more influence over price action than buyers. It is a bearish signal that indicates further downside pressure on XRP if the trend continues.

XRP Faces Crucial Test at $2 Support

XRP currently trades at $2.18, holding above support formed at $2.03. If demand weakens further, XRP bulls might be unable to defend this support level, causing the altcoin to fall back below $2, to trade at $1.61.

However, a resurgence in new demand for XRP will invalidate this bearish outlook. In that scenario, its price could rally to $2.29 and charge toward $2.50.