Let's be real. You notice XRP’s price moving up, and that devil on your shoulder starts talking. “Maybe this is it. Perhaps this is the one that gets it launched once and for all.” That voice? That's market psychology at work. If so, you might be walking yourself right into an old-fashioned bull trap. You would be mistaken, as most of your peers are likely to make this same error.

Are We Just Chasing Shadows?

Indeed, the headlines holler XRP’s 2.96% increase, as it crosses the $2.10 mark. The long/short ratio is currently leaning bullish at 1.07 long positions per short position. The RSI is nudging past 50. All these data points are indeed fascinating, but they’re still just colorful pixels on a screen. They don't tell the whole story. Most of all, they sure as heck don’t tell you if you’ll be profitable.

What is driving this rally? Is it true conviction that XRP will succeed in the long term? Or is this a massive case of FOMO – Fear Of Missing Out – all around? Are they getting on board because they have done their homework and explored all of their choices? Or are they just lemmings, doing what everyone else does for fear of losing their shirts?

Think of it like this: You're walking down a busy street, and suddenly everyone starts running. And do you take time to find out why they’re running? Or do you just join the stampede? Most people just run. That's herd behavior. In the crypto market, herd behavior can be deadly.

We are all increasingly overwhelmed by a cacophony of news and viewpoints, each demanding and competing for our attention. Confirmation bias compels us to look for information that reinforces what we already think. This validates our beliefs and sometimes even blinds us to data that goes against those beliefs. You’re still watering the healthy plants, that’s just now your new primary focus. In the meantime, the ones that require the most attention are being left behind.

Repeating History Before Our Eyes?

The tightening Bollinger Bandwidth on XRP’s 4-hour chart is signaling a breakout warning. It’s at its most constricted level since October 2004. And here’s what happened the last time it compressed this much. The FTX crash. Anxiety should be rising.

Now, I’m not one to suggest that history is going to repeat itself in just the same way. I’m not claiming that every effort should go to the historically high-appropriating committee chairs. This is where taking a wider view really pays off and is important to do.

Even the market is at the mercy of Bitcoin’s pump around $87,000 (this point probably not a good). Combined with renewed inflation fears and a weakening dollar, these developments are pumping up the “digital gold” narrative. The wild cards around the Federal Reserve are pouring gasoline on that fire. All of these things benefit crypto. But are they sustainable?

Here's the truth: A rising tide lifts all boats. As Warren Buffet once said, when the tide goes out you’ll see who’s swimming naked.

Protecting Yourself From The Inevitable

So what should you be doing to prevent losing money from this possible bull trap? Want to make sure you’re not the naked swimmer when the tide goes out?

First, do your own research. Go beyond headlines and social media clickbait. Dig into the fundamentals. Understand the technology. Assess the risks. Really understand what you're investing in.

Second, be truthful about how much risk you can really handle. Can you stomach a significant loss? If you can’t, then perhaps XRP isn’t the investment for you.

Third, have an exit strategy. Know your target price. Know your stop-loss level. And stick to them, no matter what. During your investment period, greed and fear will become your greatest enemies.

Fourth, be skeptical of narratives. Question everything. Don't just blindly accept what you're told. Particularly when it’s a deal that seems too good to be true.

Finally, don’t forget that previous performance does not guarantee future success. Just because XRP has gone up tremendously before doesn’t mean it will go up again now.

  • Key Resistance Levels: Watch for a potential retest of $2.18.
  • Key Support Levels: Be prepared for a fall back towards $2.03 or even $1.99.
  • Confirmation Signals: Wait for a directional break above $2.18 or below $2.03 before making any major moves.

Ultimately, investing in XRP is a gamble. The potential upside may be considerable, but so too is the downside risk. Don't let market psychology cloud your judgment. Don't let FOMO drive your decisions. And please, for the love of blockchain, don’t let anybody convince you that investing in crypto is a guaranteed win. It's never a sure thing.

Take a close look at the marketplace and imagine you are a home gardener. Market’s euphoria is sunshine, and fear is a winter storm. Through it all, while you can’t change the weather, you can change your seeds and how you shield your garden.

Be smart, stay connected and play by the rules. Get prepared to come to the table with the willingness to walk if you don’t like the outcome. Because in the world of crypto, just like in life, the best decision is often recognizing when it’s time to cash out. Oh, and just as a reminder, keep in mind that Benzinga.com is not an investment adviser!