Ripple seems to be bracing for a major drop against bitcoin as it formed a head and shoulders pattern on its 4-hour time frame. Price has yet to break below the neckline before confirming that a longer-term drop is underway, and ripple could fall by the same size as the chart pattern.
The 100 SMA just crossed below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, a break below the chart pattern’s neckline is more likely than a break higher. In case the latter happens, though, resistance is located at the moving averages then at the right shoulder.
Stochastic is already turning up from the oversold area to indicate that sellers are taking a break and letting buyers take over. Similarly RSI is pulling up to suggest that Ripple might do so as well.
Bitcoin and other digital currencies have enjoyed a lot of support recently on rising geopolitical risks, particularly the looming elections in the UK and the rift in the Middle East. Former FBI head Comey’s testimony on Thursday is also keeping traders on edge and in pursuit of higher returns in alternative assets.
However, bitcoin took a huge hit when investor Mark Cuban tweeted yesterday that the rise in price is not due to good valuation and that bitcoin is more of a religion than an asset. This could lend some support for other digital assets like litecoin, Ripple, and ether but the fact remains that these cryptocurrencies are driven by the same market dynamics as well, which means that it could also be in a bubble.
Even so, bitcoin could retain supremacy over Ripple as it is in a more liquid market. With that XRPBTC could be poised for a breakdown soon, but it would be more prudent to wait for the move to happen and join the momentum instead of anticipating the move. Pullback opportunities to the head and shoulders neckline could offer better return on risk.