XRP Price Signals Potential Rebound: Is $5 Still Attainable?

XRP price flashes classic ‘hidden bullish divergence.’ Is $5 still in play?

The recent chart for XRP reveals a classic “hidden bullish divergence,” indicating potential relief for buyers. With over $695 million in short positions, a price rebound could lead to significant short squeezes.

Key Takeaways

The XRP charts indicate a hidden bullish divergence, possibly benefiting bullish traders.
More than $695 million in short positions on XRP may face liquidation if prices recover.

XRP Bulls Maintain Focus on $5 Despite Recent Decline

XRP’s three-day chart shows a phenomenon known as a “hidden bullish divergence,” where the price creates higher lows while the Relative Strength Index (RSI) shows lower lows. This pattern is generally interpreted by analysts as a sign of declining downward momentum.

This hidden bullish divergence has appeared twice in XRP’s recent trading history. The first instance in early 2022 led to a substantial 69% rebound before prices continued to decline. The second occurrence was between late 2023 and early 2024, which preceded a 49% rally that saw the price stabilize.

XRP/USD three-day chart. Source: TradingView

Both instances demonstrate that XRP frequently experiences swift rebounds following hidden bullish divergence signals, although these rallies tend to be short-lived. Essentially, while this setup can lead to temporary gains, it does not guarantee a longer-term bullish reversal.

Recently, XRP experienced an 11.95% drop, trading as low as $2.229 on Tuesday. Commenting on the situation, pseudonymous analyst Guy on the Earth noted, “I’d hope to hold this range and bounce back as the week progresses, although the current bias is bearish.”

He continued, “The support area corresponds with the lower trendline of XRP’s current symmetrical triangle pattern and its 1.0 Fibonacci retracement level, as illustrated below.”

XRP/USDT weekly chart. Source: TradingView

The target price for the symmetrical triangle breakout sits at around $5, indicating a possible gain of about 115% from present price levels. This structure further supports the rebound potential suggested by the hidden bullish divergence.

Over $695 Million in XRP Short Positions at Risk

Data from derivatives markets reveals an increasing disparity between long and short positions in XRP. As of Tuesday, the total short liquidations on XRP surpassed $695 million, while long positions were merely $32.1 million, according to CoinGlass. This data illustrates a market heavily skewed towards shorts, indicating a growing sense of pessimism among traders.

XRP/USDT three-month liquidation heatmap. Source: CoinGlass

Most of the liquidity in short positions lies between the $2.60 and $3.50 range, which suggests that even a modest price increase towards this area could trigger a wave of short liquidations, also known as a “short squeeze.”

Conversely, there is minimal long-side liquidity below $2.16, indicating that a long flush already occurred during October’s downturn.

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This current situation suggests that while XRP may face limited downside risk in the short term, the potential for increased volatility could arise if the price pushes into the heavily shorted zone.