XRP’s 275% Yearly Growth Might Have Left It Overvalued – Here’s Why

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After years of investing in cryptocurrencies and witnessing countless bull runs and bear markets, I must admit that the recent surge in XRP has been quite impressive, but it also raises some concerns about its current valuation. As a seasoned investor, I’ve learned to always be cautious when prices skyrocket too quickly without any fundamental changes in the underlying project.

Has the value of XRP been inflated compared to its actual worth? This is a query that many investors have raised since the altcoin started its rapid increase in November.

From my perspective as an analyst, although there have been expectations for the XRP price surge to slow down, a substantial correction has yet to materialize. However, based on my on-chain assessment, the token could potentially become overvalued relative to the prevailing market conditions in the near future.

The Ripple Token Faces Huge Risk

A little over a month ago, I witnessed a significant milestone when XRP’s value surpassed the $1 mark for the first time in quite some time. Some market analysts initially speculated this might have been a deception. However, their assumption proved to be unfounded as it currently stands at around $2.36.

Despite several predictions coming out that the token’s value might rally toward the $5 mark, some on-chain indicators suggest that it could be challenging. One indicator that aligns with the thesis is the Network Value to Transaction (NVT) ratio.

As an analyst, I find that the NVT (Network Value to Transactions) ratio serves as a useful tool for assessing the growth of an asset’s market capitalization in relation to its transaction activity. When the NVT ratio decreases, it suggests that network transactions are expanding at a faster pace than the market cap, which is a positive sign and implies that the current price may be undervalued, potentially indicating a good buying opportunity.

Conversely, an increase in the NVT ratio implies that the market value of XRP is expanding at a quicker rate, which propels it towards a more overvalued sector. As Santiment indicates (see above), the NVT ratio for XRP has soared to a significant level of 477.

One more sign with a similar sentiment is the discrepancy between price and Daily Active Addresses (DAA). The price DAA quantifies the rate of price increase in relation to user activity. When this metric rises, it means that user activity is supporting the price movement, which suggests a bullish trend.

Currently, it’s worth noting that the cost of DAA divergence has fallen by a significant 326.13%. This substantial decrease may be indicative of fewer XRP wallets engaging with the token. If this trend persists, there’s a possibility that the XRP price could dip below the $2 mark.

XRP Price Prediction: Momentum Stays Bearish

On a 4-hour timeframe, XRP’s price reached near $2.40, but it met resistance at approximately $2.35, causing the price to dip to around $2.31. The Moving Average Convergence Divergence (MACD) indicates that the short-term (12 periods) and medium-term (26 periods) Exponential Moving Averages have moved into negative territory.

This drop indicates bearish momentum around the token. Should the momentum continue to decline, then the XRP price might fall to $2.05.

It appears that this analysis indicates XRP may currently be overpriced, with potential lows around $1.90 if market conditions remain bearish. On the flip side, if there’s significant demand, XRP could rise as high as $2.73.

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2024-12-21 15:55