XRP, one of the top cryptocurrencies, saw an impressive rally on Wednesday, increasing its value by more than 20%. The rally has resulted in significant gains for investors, with an estimated gain of around $1 billion. Amid the rally, the market is abuzz with speculation that XRP could hit $5, fueled by technical patterns and renewed investor optimism.

Investors benefit when XRP surges

On Wednesday, XRP saw a significant increase, testing the upper threshold of an important flag channel. This increase resulted in a total profit of around $800 million for investors. However, as profits are being realized, this trend may dampen the upward momentum in the short term.

The recent price surge occurred after Ripple approved the launch of the stablecoin RLUSD earlier this week. Since this announcement, XRP has risen over 20%, recovering from a dip below $2. This legal milestone has reinforced investor confidence, fueling XRP's upward momentum.

Technical indicators suggest the potential for $5

Options traders are optimistic about XRP's prospects. The $5 call option, traded on Deribit, is the second most popular XRP option and has an open interest outside the highest value of $1.25 million. This suggests that traders are betting on a sustainable bullish trend.

From a technical analysis perspective, XRP is currently forming a 'bull flag' pattern. This pattern, characterized by a strong upward movement (flagpole) followed by a consolidation phase (flag), often indicates a continuation of the bullish trend. If XRP breaks out with significant volume above the upper boundary of the flag channel, the price could surge to a maximum profit target of $4.75.

For this bullish scenario to materialize, XRP must break through the psychological resistance level near $3.00. Momentum indicators such as the Relative Strength Index (RSI) and the Stochastic Oscillator are both above neutral and rising, signaling strong bullish sentiment.

On-chain metrics show mixed signals

Despite the price surge, on-chain metrics paint a more nuanced picture. The weekly active addresses of XRP have decreased from 496,000 last week to 341,000 as of Wednesday. This decline in active addresses indicates weakening on-chain activity and reduced investor participation.

If XRP does not maintain its growth momentum, a daily candle closing below $1.35 could invalidate the bullish thesis, potentially pushing the price down to $0.93.

Outlook: Can XRP reach $5?

Although the recent price increase of XRP is notable, its journey to $5 still faces many challenges. Investors are closely monitoring key resistance levels and profit-taking trends. However, with strong technical patterns and increasing interest from options traders, XRP could still achieve significant gains if it maintains its growth momentum.

Whether XRP can surpass the $3.00 mark and continue to rise will depend on sustained bullish sentiment, increased trading volume, and broader market conditions. Currently, XRP remains a notable cryptocurrency as it attempts to capitalize on its recent gains.

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