XRP Price Signals Bull Trap: Will Altcoin Traders Wait for the Ripple Dip or Seize the Breakout?

XRP has been on a remarkable rally in recent months, breaking past several key resistance levels and gaining strong momentum in the market. But is a bear trap lurking ready to trap unsuspecting traders?

As of January 30, 2025, Ripple’s XRP is trading at approximately $3.12, marking a steady climb. However, despite the bullish sentiment, analysts warn of a potential bull trap lurking just below the $2.95 level, which could shake out overleveraged long positions before an eventual breakout.

Market Overview: XRP’s Price Momentum and Challenges

The XRP price has maintained an upward trajectory, posting its largest monthly candle in years, surpassing the previous high of $2.07 by over 40%. Market enthusiasm has been fueled by increased investor confidence, speculation over XRP’s inclusion in a potential U.S. strategic reserve, and Ripple’s growing influence in the digital payments sector.

XRP price has the potential to pull back near $2.95 despite Ripple’s bullish outlook. Source: KLCTraders on TradingView

However, despite XRP’s ability to stay above the $3 mark since mid-January, the asset has struggled to move above its all-time high of $3.40, raising concerns about a potential retracement before the next leg up.

Spot Market Activity and Investor Sentiment

Retail traders have been leading the recent rally in XRP, with frantic spot buying across major exchanges, including Binance and Coinbase. Per data from Hyblock Capital, the spot buyers remain active, continuing to drive the upward momentum. Institutional interest in XRP has remained flat, while retail euphoria has acted as a key driver in increasing the price.

Solana crashes under 3M transactions, while XRP Ledger smoothly processes 10M—proving it’s built for global adoption. Source: CryptoGeek via X

Looking deeper into the aggregated spot volume, it shows a decline in trading activity compared to late December 2024 and early January 2025. This volume decrease does not point to a bearish trend but rather to a consolidation phase of the market. Historically, such periods of reduced trading activity often precede major breakouts or corrections, depending on broader market sentiment and liquidity conditions.

Liquidity Traps and Key Support Levels

Despite a strong bounce from early-week lows at $2.70, XRP’s price action has formed liquidity pockets that may be exploited on the downside. The funding rate has slightly decreased over the past week, indicating an increase in short positions by futures traders. This suggests that while bullish momentum remains intact, there is growing skepticism among leveraged traders.

Ripple’s XRP price chart analysis shows possibilities for a $4 breakout ahead. Source: Nathanl19 on TradingView

The $3 mark serves as a key psychological level, with many long traders likely placing their stop-loss orders just below it. Market movers could push the price downward to trigger these stops and collect liquidity before a potential rebound. A fair value gap and overlapping order block between $2.98 and $2.90 could act as a crucial bid zone, where strong buying interest may emerge. However, if XRP experiences prolonged sideways movement below $3, it could indicate a shift toward seller dominance, increasing the risk of a deeper correction.

Potential for a 45% Upswing

Despite the risk of a bull trap, technical patterns suggest that XRP still has room for further gains. A bullish breakout from the ongoing flag pattern could pave the way for a 45% rally, potentially driving prices toward the $4.50–$5.00 range. Analysts remain cautiously optimistic, emphasizing that XRP must sustain momentum above key resistance levels for this scenario to materialize.

Ripple’s bullish wedge pattern signals more than a 45% surge in XRP price ahead. Source: MetaShackle on TradingView

If buyers step in at the identified bid zone between $2.98 and $2.90, a swift rebound could lead to a test of higher resistance levels. The first major target would be $3.40, followed by a retest of the $3.70 range. A successful breach above these levels would confirm a bullish continuation and increase the likelihood of XRP reaching new highs in the coming weeks.

Ripple’s Position on the Strategic Reserve Debate

Beyond price action, Ripple’s leadership has been vocal about the potential creation of a U.S. government-backed Strategic Bitcoin Reserve. Ripple CEO Brad Garlinghouse has advocated for a more diversified approach, arguing that if a reserve is established, it should include multiple digital assets rather than being exclusively focused on Bitcoin.

Investors are split on whether Bitcoin or XRP should lead in the US Strategic Reserve. Source: JP Richardson via X

This debate has stirred controversy within the crypto community, with some arguing that a Bitcoin-only reserve would reinforce the asset’s dominance, while others support a broader basket of cryptocurrencies, including XRP and Ethereum. The outcome of these discussions could have significant implications for XRP’s long-term adoption and institutional use cases.

Conclusion: Cautious Optimism for XRP Traders

XRP’s price action remains at a critical juncture, with both bullish and bearish forces at play. While the risk of a bull trap below $2.95 cannot be ignored, the broader market structure still favors a potential breakout. Traders should closely monitor liquidity levels, support zones, and overall market sentiment to navigate upcoming price movements effectively.

The XRP price dipped and recovered overnight. Source: XRP Liquid Index (XRPLX) via Brave New Coin

With Ripple’s ongoing advocacy for a diversified digital asset reserve and increasing retail interest, XRP continues to be a focal point in the crypto space. Whether it successfully breaks the current resistance or faces a temporary retracement, the coming weeks will be crucial in determining its next major move.