Three reasons why XRP price could drop 60% and still have the best returns for the next bullish cycle

XRP price has long been stuck in the battle between the US Securities & Exchange Commission (SEC) and Ripple. The announcement of this lawsuit caused a massive setback to the altcoin, leading to a 60% crash in roughly two weeks.

Since then, the remittance token has not had a good time in terms of returns. With the start of the bear rally, things could get much worse before they could get better. So let’s explore the worst-case scenarios before looking at the bullish outlook.

XRP price and the worst that could unfold

XRP price and technicals provide a succinct understanding and probable outcomes or expectations. The chart attached below contains the volume profile indicator overlaid on the two-week price chart of XRP.

From a price action perspective, Ripple has shattered the 200-week Simple Moving Average (SMA), suggesting the start of a bearish trend. With Bitcoin price looking to crash even deeper, there is a good chance Ripple could breach the immediate support level at $0.322. Such a development would open the path for the token to retest the volume Point of Control (POC) since 2017.

POC is the highest volume traded level for the prescribed time and is currently hovering at $0.188. Hence, from a conservative outlook, this barrier could serve as a bottom if none of the external factors are considered.

XRP/USDT 2-week chart

SEC v. Ripple and burgeoning recession concerns 

However, let’s take a closer look at things that could affect this bottom formation.

The SEC v. Ripple lawsuit has been ongoing since December 2020 and could make or break XRP price. Since we’re exploring the worst-case scenario, let’s assume that the SEC wins the battle, which would make XRP a security token and not a commodity. This situation could cause crypto exchanges to delist it and panic investors into selling their holdings.
Such a development would surely disregard the technical support levels and could potentially crash XRP price way lower.

1. The second reason is the way the central banks are ramping up interest rates to counter the effects of inflation. This move has alarmed many investors and economists who have voiced their concerns that a continuation of this move from the central bank could trigger a recession.
2. Assuming a full-blown recession hits the US, it is likely the effects will follow to Europe and the rest of the world, which could trigger a selling frenzy in traditional markets and any risk-on assets, including cryptocurrencies. Such a development could also trigger a massive crash in the crypto markets, which could potentially crash XRP price much lower than the POC at $0.188.

Considering these two outlooks, let’s take another look at the XRP price.

1. If the $0.188 barrier is broken, the next support level is around $0.134, which is the last line of defense for two reasons.
2. Beyond this level, there is a massive price inefficiency extending up to $0.0625.

The volume profile thins out considerably, adding credence to the inefficiency outlook.

Therefore, a breakdown of $0.134 could trigger a 54% crash to $0.0625 or $0.0359. Interestingly, there is another gapping inefficiency, extending from $0.0359 to $0.0093. Assuming the $0.0359 barrier remains intact, this level could be the bottom. But if the sell-off continues, there is a good chance that the XRP price could reach $0.0093.

It is all about perspective: Pessimism or opportunity?

For the majority of the investors, a crash to $0.0359 or $0.0093 could be a fatal blow to their portfolios. However, a bright side to this massive bloodbath is that patient market participants will get to buy XRP price at a massive discount.

Now, such a massive crash in altcoins can happen due to two reasons as explained below, but for XRP price, a nosedive to $0.0093 cannot happen without Bitcoin price also supporting this down move.

Regardless, this massive leg down could mark the end of the bear cycle and suggest the start of a new one. 

As the recession starts to cede and inflation rates are at the central bank’s approved levels, quantitative tightening would come to halt, which would allow investors to step back in and turn the wheel of the economy. 

While this is one of the reasons, a massive recession-fueled crash could be the key in undoing the high correlation that exists between the stock market and the crypto space. Decoupling of these two markets could put the “uncorrelated” asset thesis back into investors' minds, which could cause capital to flow into the markets again, triggering the start of a new cycle.

• If, and this is a big if, XRP price even heads back to $1 from the $0.093 bottom, it would represent a 10,629% gain.
• A move to $2 would be a 21,359% return on investment.
• And a retest of the all-time high at $3.31 would yield a 35,490% reward.

To the naysayers suggesting that this crash to $0.093 seems unlikely, the returns would still blow your mind if the XRP price bottomed around $0.0359. Investors that purchase XRP price at this level could stand to gain 9,139% if the remittance token returned to the all-time high at $3.31.