XRP bull trap lurks below $2.95 — Will altcoin traders take the bait?

XRP (XRP) is set to close its largest monthly candle in two days, surpassing its previous high of $2.07 by more than 40%. The altcoin has maintained a higher structure on the daily chart over the past three months but has struggled to establish price acceptance above its previous all-time high of $3.40.

While the altcoin has maintained a position above $3 since Jan. 15, futures traders might be tussling under the aforementioned price level.

XRP spot buyers on Coinbase, Binance remain active

Retail investors have driven XRP’s rally over the past few weeks, fueled by positive news about Ripple and market speculations that XRP could be added to a US strategic reserve.

Cointelegraph reported that XRP’s rise to a new all-time high was largely “spot driven.” New data suggests that the trend has yet to buckle in the market. In an X post, Hyblock Capital highlighted in an X post that XRP spot buyers remained active on Binance and Coinbase over the past 24 hours.

However, aggregated spot volume has indicated signs of decline recently compared to December 2024 and early January. This is neither bullish nor bearish, as trading activity may drop during consolidation and can happen regularly.

Related: How high can XRP price go?

XRP traders face a liquidity trap under $3

While the altcoin bounced strongly from its early week lows at $2.70, the recovery formed liquidity pockets that may be exploited on the downside. The funding rate has declined slightly over the past week, so futures traders are increasing their short positions.

With $3 being a psychological level, most long traders might have their stop losses just under $3, where market movers would push the prices to collect liquidity. With a strong 1-hour fair value gap and order block overlapping between $2.98 and $2.90, this could be the potential bid and reversal range for XRP.

However, the bullish reaction between $2.98 to $2.90 needs to be immediate, as a sideways chop below $3 would imply sellers’ dominance.

Consequently, the long-term expectation remains for the altcoin to break above the bull flag pattern forming over the past two weeks. The altcoin targets a 45% upswing after a pattern breakout between $4.50 and $5.00.

Related: Bitcoin preps for FOMC comments as BTC price coils near $103K

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.