- XRP’s NVT ratio spikes, signaling a potential overvaluation despite its price surge
- Plummeting active addresses divergence raises doubts about the sustainability of XRP’s rally
XRP has become one of the hottest topics in the altcoin market following its explosive rally in November. As the token’s price continues to surge, questions about its sustainability are mounting. While many had expected a market correction, XRP has yet to experience a significant pullback, leaving investors on edge.
Recent on-chain analysis, however, suggests that XRP might be overvalued when compared to broader market conditions, fueling concerns about its future price trajectory and potential risks for holders.
XRP’s NVT ratio signals overvaluation
The Network Value to Transaction (NVT) ratio for XRP highlights a potential risk of overvaluation despite its recent rally. The metric compares the asset’s market capitalization to its transaction volume, offering insights into whether its price is sustainable.
Source: Cryptoquant
XRP’s NVT ratio has fluctuated sharply in December, indicating instability. The current spike in the ratio reflects a disconnect between XRP’s price and the underlying transaction activity on the network.
While the price sits at $2.23, the high NVT ratio signals that market cap growth is outpacing network utility, a bearish sign. Unless transaction volumes catch up, XRP may face heightened correction risks, challenging the bullish momentum observed in recent weeks.
XRP: Reduced network activity?
The Price-Daily Active Addresses (DAA) divergence reveals a concerning trend for XRP’s rally. This metric assesses whether price movements align with user engagement on the network.
While XRP’s price surged to $2.23, the DAA divergence has plummeted by 326.13%. This stark decline indicates a drop in the number of active XRP wallets interacting with the token.
Source: Santiment
Such a sharp divergence suggests that the recent price spike is not being supported by robust on-chain activity.
If user engagement remains low, it could undermine XRP’s bullish momentum and increase the risk of a significant price correction, putting its current rally under pressure.
Read XRP’s Price Prediction 2024–2025
Bearish momentum persists
On the 4-hour chart, XRP remains under bearish pressure. The price attempted to reach $2.40 but faced resistance at $2.35, causing a pullback to $2.31. The MACD indicator shows that the 12- and 26-period EMAs are in the negative region, reinforcing bearish sentiment.
Source: TradingView
With declining momentum, XRP risks further drops to $2.05 and potentially $1.90 in a strongly bearish scenario. However, renewed buying interest could push the price back to $2.73.
As the token consolidates around $2.24, traders should watch for either a breakout above $2.35 or a continued downtrend.
The MACD’s position highlights caution for bullish expectations in the short term.
