The XRP rally that brought the cryptocurrency to the cusp of new all-time highs earlier this month may be losing steam, as technical indicators flash warning signs and key industry players throw cold water on the recent optimism.
CME Denies XRP Futures Plans, Contradicting Bullish Sentiment
One of the key catalysts fueling XRP’s surge in early January was the much-publicized meeting between Ripple CEO Brad Garlinghouse and former U.S. President Donald Trump. The sit-down spurred speculation that the Trump administration could embrace XRP and accelerate its mainstream adoption. However, those hopes were dampened on Wednesday as the Chicago Mercantile Exchange (CME) swiftly denied rumors that it planned to launch XRP futures contracts.
The CME, which is the preferred venue for institutions to trade Bitcoin and Ethereum derivatives, indicated that it is not ready to look beyond the two largest cryptocurrencies at this time. This signals that, despite the Trump meeting generating buzz, real institutional demand for XRP may still be lacking. It also points to potential regulatory hurdles that could slow XRP’s path to wider acceptance in traditional finance.
“The swift denial from CME on XRP futures pours cold water on the recent rally driven by the Trump meeting and speculation of related developments. It indicates that institutions still have a ways to go before they embrace any crypto assets outside of bitcoin and ether.”
– John Wu, President of Ava Labs
Technical Studies Point to Weakening Momentum
On the charts, warning signs are also flashing that XRP’s upward momentum may be waning after its blistering 55% rally so far in January. One red flag is a bearish divergence on the Mayer Multiple, a widely tracked indicator that compares price to its 200-day moving average.
As XRP soared to $3.40 last week, approaching its all-time high from January 2021, the Mayer Multiple failed to confirm the move with a new high of its own, printing a lower peak than it reached in December. This signals that the bullish momentum is weakening and opens the door for a potential pullback in price. Adding to the cautious technical outlook is a MACD histogram that is showing waning momentum by printing lower highs above its center line.
“The bearish divergence on the Mayer Multiple, along with the MACD histogram losing steam, is a worrying sign for XRP. After such a strong run, the technicals are hinting that the rally is getting a bit long in the tooth and ripe for a breather.”
– Tony Spilotro, Cryptocurrency Market Analyst
Conclusion: Short-Term Caution Warranted for XRP
XRP’s impressive start to 2021 is showing some cracks, with the CME pouring cold water on institutional adoption hopes in the near-term and technical indicators flashing some warning signs after an overheated rally. While the cryptocurrency could certainly catch a bid if bitcoin resumes its uptrend, traders should be cautious of the emerging red flags and waning bullish momentum.
In the short-term, key levels to watch will be $3.00 on the downside, which previously acted as resistance and could now provide support. A break below that level would confirm the loss of bullish momentum and open the door for a deeper pullback. Conversely, XRP would need to decisively clear the $3.40 region to set the stage for a retest of record highs and erase the potential bearish signals.
- Key Upside Level to Watch: $3.40
- Key Support to Hold: $3.00
Ripple believers maintain a bullish long-term outlook on the cryptocurrency, but after an overextended rally to start the year, a period of consolidation or a pullback would be healthy before the next leg higher. Patience is warranted in the near-term as the bullish momentum has shown signs of waning this week.
