Is XRP Approaching a Death Cross?

XRP (CRYPTO: XRP) has recently seen a substantial valuation pullback. While the cryptocurrency is regaining some ground in today's trading, the token got hit with a big sell-off yesterday as concerns about valuation bubbles and geopolitical dynamics prompted pricing contractions in the stock market and the crypto market.

With the valuation volatility, XRP could be on the verge of entering a death cross -- a technical pattern that can suggest that more sell-offs are on the horizon. Should investors be worried?

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Is a death cross on the horizon for XRP?

A death cross occurs when a stock or cryptocurrency's 50-day simple moving average (SMA) crosses below the 200-day SMA. With recent volatility impacting the token's price and the broader cryptocurrency market, it wouldn't be surprising to see XRP enter into death-cross territory. Geopolitical and macroeconomic dynamics have recently spurred valuation pullbacks in the crypto space, and a recent uptick in concern about valuations across stocks and cryptocurrencies has added to a rising bearish wave that could be on the verge of becoming more powerful.

As of this writing, XRP's 200-day SMA is approximately $2.55. Meanwhile, its 50-day SMA is $2.74. Accordingly, the coin would enter a death-cross pattern if its 50-day SMA fell roughly 7%.

Technical analysis patterns reflect reoccurring valuation trends. In the abstract, these trends are reflections of human psychology in relation to pricing moves on a market.

Along those lines, some investors use technical analysis to predict where valuations for stocks and cryptocurrencies are heading in the near term. While stocks and cryptocurrencies will sometimes trade in line with technical-analysis patterns, there's no guarantee that XRP's current setup means that the coin will trade in a death-cross pattern.

Additionally, there's no guarantee that XRP would see subsequent sell-offs associated with the death cross, even if its token price were to enter the pattern. Technical patterns can be used as a tool to forecast valuation trends in the near term, but they're far from infallible -- and a wide range of catalysts are involved in shaping cryptocurrency prices.

XRP's pricing performance for the remainder of the year will likely be heavily shaped by the market's assessment of whether the Federal Reserve is likely to cut interest rates again in December -- and the Fed's eventual move on that front.

Inflation reports and other macroeconomic data will be key factors in the Fed's policy on rates. Geopolitical dynamics between the U.S. and China and trade negotiations with other countries can also be expected to factor into XRP's pricing trajectory. While entering into a death-cross pattern could coincide with a sustained uptick in bearish sentiment, there are probably more important catalysts for investors on the horizon.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends XRP. The Motley Fool has a disclosure policy.