Since December 3, XRP has been in a correction phase, losing 25% of its value from its multi-year high of $2.90. Simultaneously, XRP’s market capitalization decreased by 8%, dropping to $133 billion and falling below Tether USD (USDT), making it the fourth-largest cryptocurrency by market cap.

Reasons Behind XRP’s Decline

Despite its recent losses, XRP outperformed Bitcoin in November, rallying 354% between November 1 and December 5. During the same period, BTC only recorded a 45.5% increase. XRP’s BTC pair reached a 3.5-year high of 0.00003012 on December 3, driven by heightened network activity and positive market sentiment.

However, by December 5, this ratio had dropped to 0.00002334, erasing all gains made between December 1 and December 3. Interestingly, this decline coincided with Bitcoin smashing through the highly anticipated $100,000 mark.

Additionally, $12.8 million worth of long XRP positions were liquidated on December 5, compared to just $7 million in short liquidations, according to CoinGlass. These liquidations likely added further downward pressure on XRP’s price.

Technical Outlook: Bullish Formation Intact

On the 4-hour chart, XRP has formed a bull flag pattern, a bullish continuation setup that occurs when the price consolidates in a downward-sloping range following a sharp uptrend.

If XRP closes decisively above the upper trendline of the flag at $2.37, the price could rise by the height of the prior uptrend. This move would set XRP’s target at $4.83, a potential new all-time high.

Risks and Support Levels

The Relative Strength Index (RSI) has dropped from overbought territory at 82 on December 3 to 52 on December 5. If the RSI continues its downward trajectory, it could increase the likelihood of a deeper correction.

A pullback from $2.37 might lead to a retest of the flag’s lower trendline at $2.05, which aligns with the 50-period Simple Moving Average (SMA). Below this, the next critical support level lies at $1.68, near the 100 SMA.

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