XRP rose by over 17% on the last day, taking the market capitalization to an all-time high of $153.13 billion on 3 December. This rally has been supported by growth in active wallets and trading volume and a rise in trading volumes. However, on-chain data shows that the bullish sentiment could be fading. Whereas retail investors are fueling the present rally, increasing institutional scepticism may pose a headwind to XRP’s short-term price action.
Source: TradingView
Santiment data shows that retail investor engagement is the main driver behind the recent XRP price surge. This can be seen by the active wallet addresses, which increased by more than 116,000 within the last 24 hours, showing that more and more people are engaging in the buying of the coins. XRP soared in market movement with trading volume rising by 93.29% within the same period as shown: This increase in retail trading comes after the U.S elections, whose outcome was favourable for the crypto market, particularly due to political certainty, which has led to increased buying pressure of assets like XRP.
XRP’s Retail-Driven Surge
The market capitalization of XRP had surged past $155.69 billion, showing that the token is continuing to rise in the crypto space. Retail investors have been propelled by post-election momentum to buy XRP, pushing up its price. In contrast, institutional investors, also known as ‘whales’ has been less active in the recent days than their retail counterparts.
While XRP continues to show an upward trend in its price, institutional investors’ activities indicate increased concern. An essential sign of this prudence is the fall in stablecoin reserves, which currently constitute 53.993% of the total circulation, down from previous months, reflecting the more cautious behavior of large market actors. The bigger and more active investors known as whales usually dominate the cryptocurrency market and their lack of interest in adding new assets can constrain XRP’s upward movement.
Institutional investors are still rather wary, according to technical analysis. The trend following the MACD indicator has indicated a bearish crossover, with the MACD line crossing below the signal line. This indicates that after such a technical pattern, the price may likely fall as this pattern often comes before a price pullback. Also, the MACD histogram has crossed into the negative territory, indicating a continuation of the bearish trend in the market.
XRP’s Profit-to-Loss Ratio Concerns
Adding more to this is the on-chain profit-to-loss ratio, which reveals how much profit traders have taken and how much loss they have incurred. The metric recently stood at about 0.374, suggesting that slightly over a third of investors who are part of the rally are selling their tokens. In the course of a price rally, this low profit-to-loss ratio raises the concern of market analysts that traders are apprehensive to take long positions. In other words, while tokens have been tremendously successful in the short term, many traders doubt the sustainability of the growth.
The lack of forceful buying and negative technical signals argue that XRP’s price may have a hard time holding onto gains in the following days. The inability of the market to push through more longs means that the bullish rally may falter if no new drivers appear.
XRP at a Crossroads
Such changes may be brought by the recent WisdomTree filing of an application for a spot XRP exchange-traded fund (ETF). If such a product gets the nod from regulators it could open the door for more institutional investment, which is something that token needs to improve its liquidity. Institutional investors are usually more cautious and a favorable regulation can persuade them to invest more into token.
However, the short-term price increase of XRP is not unambiguous, and the market is still quite uncertain. Individual investors are pushing the price up, although institutional investors are becoming more careful, and the technical signals are negative. As the market processes these signals, XRP is at a crossroads. If retail sentiment remains favourable and stronger than institutional scepticism, it will be quite possible for the token to keep surging higher. However, the rally’s sustainability will depend on the decreasing on-chain metrics and technical analysis resistance.
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