Here’s why Ripple’s XRP is ripe for a bearish breakdown

Ripple’s token, XRP, has seen a recovery after hitting a low of $0.5078 on October 3, following the announcement of its new US dollar-backed stablecoin. At the time of writing, XRP was trading at $0.5500, bringing its market capitalization to $31.2 billion, making it the seventh-largest cryptocurrency by market cap.

Despite this recovery, XRP has underperformed relative to most other cryptocurrencies, showing a 6.3% decline this year. In comparison, Bitcoin (BTC) has gained 54.4%, while meme coin Pepe (PEPE) has surged nearly 800%.

Ripple has achieved several significant milestones this year. It faced a $125 million fine in its ongoing legal battle with the U.S. Securities and Exchange Commission (SEC), a considerably smaller penalty than the $2 billion originally sought by the agency.

In addition, Ripple launched its RLUSD stablecoin as part of its strategy to compete with major players like Tether, Circle, and PayPal. The stablecoin will initially be available on platforms such as Uphold, Bitstamp, and MoonPay.

Stablecoins have become a lucrative business in the financial services sector, as evidenced by Tether’s profitability. Recent filings revealed that Tether earned more than BlackRock, which manages over $11 trillion in assets. Stablecoin issuers generate revenue by investing their reserves in low-risk assets, like U.S. Treasuries. However, for new issuers like Ripple, competing with Tether, which holds $120 billion in assets, remains a challenge. For example, PayPal’s PYUSD stablecoin holds just $632 million in assets, making it the ninth-largest stablecoin by market cap.

Ripple also introduced XRP Ledger, an open-source blockchain that aims to offer a more efficient alternative to networks like Ethereum and Solana. Although the platform initially saw strong growth, the total value locked (TVL) in XRP Ledger has plateaued at around $14.6 million. However, recent data from Santiment shows a growth in the number of wallets on the XRP Ledger, indicating increasing adoption.

XRP price may have a bearish breakout

Ripple’s token, XRP, has shown gradual gains this month but is currently facing bearish technical signals. On the daily chart, XRP is trading below the Ichimoku cloud, which typically indicates a bearish outlook.

Additionally, the token has formed a bearish flag pattern, characterized by a long flagpole followed by a flag-like consolidation pattern. Within this flag section, a rising wedge formation is present, which is another bearish indicator.

XRP is also trading below its 50-day moving average and has formed a double-top pattern at $0.6592. This pattern suggests that the token could be poised for a bearish breakout in the near term. If the price breaks down from this formation, the next support level to watch will be $0.5021, the neckline of the double-top, which is approximately 8.5% lower than the current price.