Ripple is the cryptocurrency developed by Ripple Labs to be used as the blockchain-based alternative to the current cross-border money transfer and remittance systems used by financial institutions. After a bullish end to 2017 where it emerged as one of the top 5 best performing cryptocurrencies, Ripple has taken a battering in 2018, languishing near its listing price levels. So what is the outlook for this crypto-coin?
Part of the strong headwinds that Ripple has experienced has to do with its pending cases with the US Securities and Exchange Commission (SEC). The SEC wants to examine the crypto to see if it going to be categorized as a security or not. If indeed it is classified as a security token, then it would need to be regulated and would face a lot of hurdles ahead to redirect the workings of its token.
Still, in the face of that regulatory decision, the Ripple Foundation has pressed on—reaching a milestone of over 100 contracts signed with international banks and financial service companies.
Ripple has not had a good 2018. Even when most other cryptos were experiencing periods of mild gains, Ripple had a hard time gaining on its share price. The long-term outlook on the weekly chart shows a crypto that is inching dangerously towards its pre-2018 levels. Price is now at the $0.2892 level.
XRP/USD Weekly Chart: September 7, 2018
This price level corresponds to an area of support, very close to the lowest prices seen in this crypto in late 2017. There is a descending trendline which marks the resistance. Both the support line and the descending trendline trace out a descending triangle, with price located very close to the point of convergence of these lines at the apex.
The picture on the weekly chart indicates that a big move is on the way. But what will this move be? Will it be a classical resolution move of the descending triangle to the downside, or will it be a move above the descending trendline, probably boosted by a piece of positive news?
XRP/USD Daily Chart: September 7, 2018
We can see from the daily chart, a clearer picture of the descending triangle. We can see that there is still some room for the price to oscillate between the two borders of the triangle before price either breaks to the downside on a technical basis or breaks above the descending trendline on the back of positive news.
So what are the trade scenarios for XRP/USD going forward?
- Trade Scenario 1
The price action is presently pushing in a downward direction. Many of the top cryptos (XRP included) tend to be dragged by Bitcoin prices. As at the time of writing, Bitcoin is still trending downwards. Therefore, it is expected that the downside will still persist, at least until the price hits the horizontal trendline support at $0.27316. What happens next will depend on what the market sentiment is. However, a break below the support line cannot be ruled out and is very much on the cards.
- Trade Scenario 2
It is also possible that the price may bounce off the support line, especially if Bitcoin experiences a recovery. Bitcoin is presently $200 north of established support for 2018. If Bitcoin bounces, then it is possible that XRP/USD may bounce off the support line. However, any bounce moves will be limited by the descending upper trendline.
The long-term, mid-term and short-term outlook of XRP is:
- Long-Term – bearish
- Mid-term – bearish
- Short-term – bearish
The long-term market sentiment as seen on the weekly chart is bearish because this chart is marked by progressively lower highs. This shows that the ability of buyers (who get in by buying off the support) to push prices higher is weakening by the day. The odds for a downside breakout of the descending triangle occurring are very high.
The outlook for the medium term is showcased on the daily chart. Here, we see that price still has some downside movement left. Sellers will force prices down to at least the support line.
Please note: this analysis was done on a weekly chart. It takes a whole week for a candle to form, so these moves may take several weeks to play out. Entries should be made on shorter time frame charts such as the daily chart or the hourly chart.
This piece is for educational purposes only and should not be construed as a recommendation to buy or sell XRP at any price.
Eno is an Associate Member of the UK Society of Technical Analysts (STA). He writes about the financial markets and the technology behind the markets. His articles can be seen on several forex blogs and broker educational websites.