XRP's price has taken a hit, dropping alongside the broader crypto market. This decline is largely due to a tech stock sell-off triggered by China's AI startup, DeepSeek. As of January 27, XRP is down about 10.25%, sitting at $0.81. Several factors are driving this downturn, reflecting both market trends and specific developments related to XRP.

Here are the key points:

  • The overall crypto and stock markets are experiencing a sell-off, influenced by news surrounding DeepSeek.
  • Many overleveraged long positions in the XRP Futures market have been wiped out.
  • Despite the drop, XRP is still eyeing a potential bull flag breakout.

The drop in XRP mirrors declines in the larger crypto market, especially after Bitcoin fell below the $100,000 mark. This downward trend in crypto reflects negative sentiment in U.S. tech stocks.

DeepSeek has gained attention for its efficient performance on less advanced chips. This raises concerns about the valuation of companies like Nvidia that depend on high-end hardware. Nasdaq 100 futures fell by 3.4%, while S&P 500 futures dropped by 2%. XRP's price movement closely tracks these trends, with a correlation coefficient with Nasdaq 100 hitting 0.78—the highest since September 2023.

The price drop has led to significant liquidations in the derivatives market. Over the last 24 hours, about $32.92 million in long XRP positions were liquidated, compared to just over $3 million in shorts. This situation forces bullish traders to sell their positions when long positions get liquidated.

The cascading effect of these liquidations has pushed XRP's price down, similar to the period from December 18-20, when $72.6 million in long positions were wiped out, causing a 23% drop to a low of $1.95.

However, XRP is still in line with a bullish continuation pattern, suggesting a potential rebound ahead. It is forming a bull flag pattern, indicating a chance to regain bullish momentum if key support levels hold.

This bull flag developed after XRP rallied from $1.90 to a local high of $3.94 in early January, confirming a larger symmetrical triangle breakout. Currently, XRP is consolidating within this bull flag and trading in a descending channel. Today's decline is nearing critical support levels, including the 0.786 Fibonacci retracement at $2.69. A breakout above the flag's upper trendline, currently around $3.10, could trigger another rally. The bull flag's target for February, based on the previous rally, is about $4, which aligns with the symmetrical triangle breakout target of $3.77.