After hitting a four-year low, XRP (XRP) appears on the brink of a comeback against the Bitcoin (BTC) trading pair. Fueling this optimistic turnaround is the emergence of a classic bullish pattern, namely the triple bottom formation.
XRP eyes a 30% rebound versus Bitcoin
A triple bottom pattern develops when the price forms three distinct lows, all reaching a similar price level, thus indicating strong support.
After the third low, the price breaks above the neckline resistance level formed between the lows and, as a rule of technical analysis, rises by as much as the maximum distance between the pattern's lowest point and the neckline.
As of July 12, the XRP/BTC pair was testing its neckline support of around 793 satoshis (1 satoshi = 0.00000001 BTC) for a potential breakout.
Additionally, the pair's weekly Relative Strength Index (RSI) reading of around 36 indicates that XRP is undervalued versus Bitcoin, further boosting its recovery potential in the coming weeks. That said, a decisive close above 793 satoshis will likely push XRP/BTC toward its triple bottom target of around 1,055 satoshis.
Conversely, a pullback from the neckline resistance, akin to similar retreats in recent history, risks pushing XRP/BTC toward its local bottom of 664 satoshis—down by over 15% from the current prices—by August.
Bitcoin’s 20% drawdown benefiting XRP price
XRP's renewed strength versus Bitcoin primarily comes in the wake of the German government's relentless selling of its BTC holdings in July. For context, the wallets associated with the government have witnessed 46,200 BTC in outflows since mid-June, amounting to around $2.69 billion worth of potential sell-pressure.
Furthermore, the ongoing reimbursement of over 140,000 BTC to Mt. Gox creditors has reduced traders’ appetite for Bitcoin with the XRP/BTC pair up over 20% in July.
Bitcoin dominance overall has slipped to 54.55% on July 12 from highs of 55.46% a week ago, suggesting that traders could be rotating into altcoins while the BTC price consolidation period plays out.
Looking broadly, XRP is relatively underbought versus most of the top-ranking crypto assets so far in 2024, with its year-to-date returns sitting around -26.50%.
The weekly Relative Strength Index (RSI) for XRP/BTC is rebounding after hitting its lowest level in two years at around 33, just three points above the oversold threshold. Historically, when XRP's weekly RSI last reached 33, it was followed by an impressive 194% rally, suggesting a potential for significant upward movement this time as well.
In comparison, BTC’s weekly relative strength is in a correction mode, having declined from a very overbought level of 88 in March to a neutral level of 45.50 as of July 12.
This decline indicates that Bitcoin's bullish momentum has significantly weakened in the past two months, which may benefit "underbought" big-cap altcoins like XRP in the coming weeks. XRP may reap additional benefits from the growing buzz around its "inevitable" exchange-traded fund (ETF) launch.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
