Cryptocurrency XRP is flashing red signals as technical indicators and on-chain data suggest a significant downside risk. A bearish chart formation and declining user engagement point towards a potential 45% price drop to $1.20 in the coming weeks.

Bearish Descending Triangle Signals Trouble for XRP

XRP is currently trading at around $2.13 and is forming a descending triangle pattern on the daily chart, a structure typically associated with bearish reversals. The pattern has developed since XRP’s rally in late 2024 and is defined by a flat support level alongside a downward-sloping resistance line.

A descending triangle forming after a strong uptrend is generally considered a signal of an impending reversal. If XRP breaks below its current support levels, analysts warn the price could fall by the height of the triangle—roughly 45%—bringing it down to $1.20 by the end of May.

Adding to the concern, XRP is struggling to stay above key moving averages. The 50-day simple moving average (SMA) sits at $2.18, while the 100-day SMA is at $2.06. A decisive close below these levels would increase the probability of a drop to the psychological support at $2.00. Should this level fail, the bearish scenario may play out in full.

Decline in Network Activity Raises Red Flags

The bearish outlook is compounded by a sharp fall in activity on the XRP Ledger. According to on-chain data from Glassnode, daily active addresses (DAAs)—a key indicator of user and transaction activity—have plummeted since March.

On 19 March, XRP Ledger recorded a peak of 608,000 DAAs, reflecting strong user participation. However, that number has fallen dramatically to just 30,000 in early May. Such a steep decline suggests waning investor interest and a possible lack of confidence in XRP’s short-term prospects.

Historically, a fall in network activity often leads to lower price momentum, as decreased transaction volume tends to reduce both liquidity and buying pressure.

Increased Trading Volume Hints at Market Repositioning

Despite the 1.17% price dip in the past 24 hours, XRP saw a 30% jump in daily trading volume, reaching $2 billion. Analysts interpret this surge as possible profit-taking or repositioning by traders, rather than a renewed bullish push.

Market analyst Dom commented on the trend, stating that “a large amount of market selling over the last week” has contributed to XRP’s failure to break above resistance levels. The increased selling pressure may be an early indication of further downside risk.

Outlook Hinges on $2.18 Resistance Break

All eyes are now on the $2.18 resistance level. A confirmed breakout above this line would invalidate the descending triangle, potentially opening the path for a rally towards the $3.00 psychological barrier.

However, unless bulls manage to reclaim this level with strong momentum, the bearish structure remains intact, and XRP’s path may continue downward.

For now, XRP holders are urged to monitor price movements and network indicators closely, as the coming weeks could prove pivotal for the token’s medium-term direction.