XRP Price Rally May Be Cooling as Market Signals Suggest Potential Overvaluation

• The recent spike in the Network Value to Transaction (NVT) ratio indicates that XRP’s significant price rally could be nearing its end.

• User engagement on the XRP Ledger has seen a notable decline, raising concerns that bullish trends may fade entirely.

• XRP is currently facing resistance at $2.35, with bearish indicators suggesting possible retracement towards $1.90.

Is XRP overvalued? This question looms large as XRP faces potential corrections and declining user engagement in the market.

The Ripple Token Faces Huge Risk of Correction

Approximately a month ago, XRP crossed the $1 threshold, igniting speculation about its future trajectory. Initially, many analysts deemed this breakout a potential fakeout. However, XRP has since surged to $2.36, catching the attention of both bullish and bearish market players.

While some analysts anticipate XRP could rally towards $5, several on-chain metrics present a contrary view. A critical indicator is the Network Value to Transaction (NVT) ratio, which correlates market capitalization with transaction volume. A rising NVT ratio typically signifies that the market cap is appreciating faster than transaction activity, a sign that the asset may be overvalued.

XRP’s NVT ratio has jumped to a troubling high of 477, suggesting growing overvaluation. Additionally, the price-Daily Active Addresses (DAA) divergence further substantiates these concerns. DAA divergence tracks if price growth is supported by user engagement. A declining metric indicates a lack of engagement, which could lead to decreased price support.

Currently, DAA is down by 326.13%, indicating a sharp drop in the number of active XRP wallets. If this trend persists, it could signal further price declines, potentially testing support levels below $2.00.

XRP Price Prediction: Continued Bearish Momentum

The 4-hour price chart for XRP reveals a recent attempt to reach $2.40; however, this was thwarted by strong resistance at $2.35, leading to a retracement to $2.31. Examination of the Moving Average Convergence Divergence (MACD) indicates that both the short-term (12-period) and long-term (26-period) averages are situated in negative territory, suggesting a strong bearish trend.

If bearish sentiment intensifies, XRP could potentially decline to around $2.05.

So, is XRP overvalued? This analysis underlines significant concerns regarding XRP’s current valuation. In a strongly bearish scenario, a decline to $1.90 is possible, while increased buying pressure could push it upwards to $2.73.

Conclusion

In conclusion, the current market indicators reflect a potential overvaluation of XRP, compounded by decreasing user activity and rising NVT ratios. Investors should remain vigilant, as further price corrections could unfold in the near term, leading to crucial support tests ahead.