Ripple price likely to bounce 20% as balance restores in the XRP market

Ripple (XRP) recorded a massive dip during the Wednesday trading session, but this has turned out to be a healthy correction as it saw the payments token fill an imbalance in the XRP market. Now, the upside potential may come to fruition with multiple trend strength quantifiers showing rising momentum. 

Also Read: XRP price hit a three-year low against Bitcoin as fears of Spot BTC ETF rejection span the market

XRP dip on Wednesday was a healthy correction

Ripple (XRP) price hit a three-year low against Bitcoin on January 3, coming on the back of a widespread sell-off triggered by a blog suggesting the US Securities and Exchange Commission (SEC) would reject spot BTC exchange-traded funds.

The XRP/USD three-month low at $0.5000 saw Ripple price fill an imbalance or inefficiency in the market, represented by the Fair Value Gap (FVG) between $0.4927 and$0.5111. An FVG is significant as it represents errors in the market, and the price always tends to revert to these areas and fill the gap with some more trades.

With the FVG filled, the XRP price appears ready to recover, with multiple trend strength quantifiers, the Relative Strength Index (RSI) and the Average Directional Index (ADX) indicators showing growing bullish effort.

When the RSI is moving north, it means momentum is growing, while the ADX quantifies strength. When the ADX line rises, it means the trend strength is increasing, so the prevailing trend will continue. However, when the ADX line is falling, the trend strength in question is decreasing and the asset’s price could enter a retracement or consolidation period.

Meanwhile, XRP is among the altcoins that are benefiting from the abounding hope that the US SEC will ultimately approve the spot BTC ETF applications. Evidence of this hope can be seen in the latest development, where the filers, among them VanEck, Grayscale and Fidelity,  have filed for registration of securities with the financial regulator. The approval hype momentum appears to be in full swing after the SEC met with NYSE, NASDAQ, and CBOE exchanges to discuss the spot BTC ETF.

Ripple price readies for a possible 20% climb

With the inefficiency in the market filled, Ripple price is poised for a recovery, with the RSI showing rising momentum and the ADX showing that the ongoing recovery is steadily gaining strength.

Increased buying pressure above current levels could see Ripple price restore back within the fold of the rising wedge above the $0.6000. Further north, the price could extend to shatter past the upper boundary of the rising wedge to tag the $0.6500 level.

In a highly bullish case, the gains could extend for Ripple price to collect the sell side liquidity residing above to tag the $0.7000 psychological level. Such a move would constitute a 20% climb above current levels.

XRP/USDT 1-day chart

Early profit booking from traders that suffered Wednesday’s losses could see XRP price push south, potentially revisiting the FVG. A break and close below the midline of this order block at $0.5023 would confirm the continuation of the downtrend, with an extended fall likely to see XRP market value hit the range low at $0.4174.