XRP's price has risen over 300% in the past two months and was trading at $2.10 on December 28. However, warning signs suggest that the XRP/USD price may erase at least 25% of this gain in the short term.

XRP is about to break down from the descending triangle pattern

The recent decline of XRP occurs as its price trades within a descending triangle pattern, a bearish structure that often indicates further declines.

This pattern is characterized by a series of lower highs forming a descending trendline of the triangle, while the $2.10 level acts as horizontal support.

A decisive break below the $2.10 support level could open up the potential for a deeper correction. The potential bearish target for this breakdown is calculated by subtracting the height of the triangle from the breakout point, according to technical analysis rules.

In other words, XRP's price could drop to around $1.64 by January 2025, down approximately 25% from the current price.

Whales sell off XRP

On-chain data further clarifies the bearish outlook, with metrics tracking whale addresses indicating a distribution sentiment.

In particular, the supply of XRP held by the wealthiest investors – those with balances over 1 million tokens – has decreased by 180 million since the beginning of December.

Meanwhile, the supply of entities with a balance of 100,000 XRP has decreased by 170 million. The decrease in supply for both groups of addresses aligns with the more than 26% drop in XRP from its local peak price of $2.90.

Large-scale selling from whales could create downward pressure due to the increased supply of tokens in circulation. Coupled with the price drop, this indicates that selling activity has outpaced demand.

XRP supply on Binance increases

Additionally, XRP reserves on Binance, the largest cryptocurrency exchange by trading volume, have steadily increased since mid-December, which is often a bearish signal as it typically precedes corrections.

The increase in exchange reserves reinforces the story of profit-taking at local highs, contributing to XRP's current bearish momentum.

Unless this trend reverses, XRP's price could face a 25% downside risk as supply on exchanges increases and large investors continue to sell off.