XRP Faces Potential Bull Trap Below $2.95 Amid Liquidity Challenges and Trader Uncertainty

XRP is currently facing a potential bull trap just below $2.95. Will altcoin traders take the bait? If the price drops below that level, it could be a move to gather downside liquidity. However, this might lead to a significant rally of up to 45% toward new highs.

In just two days, XRP is set to close its largest monthly candle, exceeding its previous high of $2.07 by more than 40%. Over the past three months, the altcoin has maintained a higher structure on the daily chart. Still, it has struggled to establish price acceptance above its all-time high of $3.40.

Since January 15, XRP has stayed above the $3 mark. However, futures traders might be facing challenges just below this price level. Active spot buyers are still present on platforms like Coinbase and Binance, but traders are encountering a liquidity trap beneath $3.

After bouncing back from early week lows of $2.70, XRP's recovery created liquidity pockets that could be targeted for downside exploitation. The funding rate has seen a slight decline over the past week, indicating that futures traders are increasing their short positions.

With $3 being a psychological level, many long traders likely have their stop losses just below this price point. This situation could prompt market movers to push prices lower to collect liquidity. A strong 1-hour fair value gap and order block exist between $2.98 and $2.90, which could serve as a potential bidding and reversal range for XRP.

However, for a bullish reaction to occur in the $2.98 to $2.90 range, it needs to happen quickly. A prolonged sideways movement below $3 would suggest seller dominance. The long-term outlook remains focused on XRP's potential to break above the bull flag pattern that has developed over the past two weeks. If this happens, targets are set for a 45% upswing following a breakout in the range of $4.50 to $5.00.

This article does not provide investment advice or recommendations. Remember, all investments and trading activities carry risks. It’s essential to conduct your own research before making any decisions.