Ripple’s (XRP) price decrease on May 1, the asset dropped to $2.24 on a daily high revealing that it had sustained a loss of $2.13. The market reaction was dictated by the pessimistic sentiment that arose from the failed acquisition of Circle which is the issuer of the USDC stablecoin.
This led XRP to a significant liquidation cascade with many traders sustaining long leverage positions. The sell-off as a result of liquidation led to a sell-side market imbalance.
XRP was able to stabilize around the $2.15 mark while sweeping important liquidity levels before the $2.23 mark. Contrary to current status, XRP’s traded volume increased XRP’s trading volume by 19%, hitting $3.42 billion, indicating that traders sustained market interest.
When the price exceeds the critical resistance since it is around the support level wondering whether the rally would be sufficient to break the barrier of $2.20, investors will start actively participating, hoping that XRP’s price can increase.
Analyst ALT4F pointed out a staggering 1,000% liquidation imbalance after the drop. Per Coinglass, over $14 million in long positions were liquidated in a single day, which constitutes the highest long liquidation in three weeks. In comparison, short liquidations remained staggering low at $1.5 million.
The imbalance indicates that market participants are still overly optimistic and therefore increasing their bullish bets, which deepens the sentiment but increases potential downside risk if prevailing support levels do not hold.
ALT4F highlighted a key risk for XRP in that it could face another liquidation round if the price drops below $2.15. The larger XRP community appears to hold on to their dear life as this could create a domino effect and drive the price below the $2 psychological mark. Thus, this encourages traders to step into the $2.15–$2.20 range is critical for bulls to defend prices in the near term.
There’s tempered positive sentiment for the time being. An XRP liquidation heatmap shows a notable concentration of short liquidation targets stacked just above $2.34, which is just above the prevailing price. Exceeding the $2.30 mark could lead increases in leverage, causing an avalanche of short liquidations. This would then bolster upward momentum, enabling the price to rise towards $3.
Further supports this optimistic scenario are the technical indicators. XRP’s daily charts show the asset XRP testing the upper boundary of a descending trendline within a parallel channel. XRP is likely to climb to $2.61, and key resistance after that is $3, if breakout above $2.33 succeeds.
Moreover, the RSI (Relative Strength Index) of 55 confirms increasing bullish momentum. Strong accumulation is suggested due to on-balance volume also remaining stagnant near the range high.
After the major liquidations due to XRP’s recent dip, it appears to be in the process of recovery. Moreover, the surging $2.30 resistance is likely to turn as the support with $2.20, hence making $3 more plausible than X.
However, leverage could be both advantageous and dangerous at the same time, especially after the sudden drop in bullish movement. Cautious traders must closely monitor key levels make the right move.
