IMO it's time for Ancelotti leaves from the club respectfully. He has been helping Madrid a lot to get so many trophies, and i think it's not that bad to replace him with a new capable coach. I hope they will be named some good coaches to replace him. It will be exciting to have Xabi, Zidane or even Klopp to be on their list.
I valued Ancelotti as a genius coach, but it seems he's tactically bad now. He can't still remain as Madrid's head coach with monoton tactic, which affected his club a lot. There must be a new coach with good creativity to continue in managing the club.
It just one single mistake and Real Madrid choose to fire Ancelotti.
But the pressure is really high in Real Madrid, they know they almost the best players in the world, so if team can't beat other big teams, the mistake is likely on the manager, not the player.
Xabi will likely become the new manager, he ever played for Real Madrid and have show a good results with Leverkusen in two years.