XRP's $1 milestone seems uncertain as the number of daily active addresses has decreased significantly.
Ripple's trading volume has dropped from nearly $3 billion to around $207 million.
After months of accumulation, Ripple [XRP] has reclaimed the psychological level of $1, marking an important milestone for this cryptocurrency.
However, this achievement comes with a sharp decline in trading activity, as volume has decreased from recent peaks.
Although the price increase reflects renewed investor interest, the accompanying drop in volume raises concerns about sustainability.
XRP: The rise to $1 and market context
XRP reaching $1 occurred after a long period of sideways trading, when this cryptocurrency broke through key resistance levels.
The price reached a high of $1.10, supported by strong buying activity in the early stages of the rally.
The broader market's optimistic sentiment, led by Bitcoin's recent price surge, has contributed to the revival of XRP.
However, XRP's relative strength index (RSI) shows overbought conditions at 82.69, indicating that the rally may be losing momentum.
Source: TradingView
MACD shows bullish momentum from a technical perspective, although the histogram indicates it may start to decline.
Meanwhile, XRP's volume on November 20 was at $5.49 billion, sharply down from a peak of over $24 billion just days earlier. Such a significant drop in volume raises questions about the sustainability of XRP's breakout.
The impact of the 18 billion volume decrease
Data from Santiment shows that XRP's trading volume has significantly decreased since the peak reached during the rally.
TinTucBitcoin's analysis indicates that trading volume reached over $24 billion on November 17 but has since decreased to around $5.4 billion as of the time of writing.
Furthermore, the analysis shows that trading volume has dropped from over $2.9 billion to around $207 million at this time.
Source: Santiment
This decrease in volume suggests market enthusiasm may be waning, often accompanied by traders taking profits.
History shows that an increase in volume often accompanies a sustainable price rally, but the recent decline suggests buying pressure may be fading.
Moreover, the number of daily active addresses, another important indicator, has decreased from recent highs.
This indicates that the number of participants using the XRP ledger is decreasing, potentially signaling a reduced demand in the short term.
For XRP to maintain its position above $1, it needs new participation and stable trading activity.
Source: Santiment
Factors leading to the volume decrease
The significant decline in trading volume can be explained by several factors. Profit-taking is likely the main reason, as traders capitalize on gains after XRP surpassed the $1 threshold.
Additionally, the broader market sentiment may be turning cautious, especially as other cryptocurrencies also experience volume declines after recent rallies.
Can XRP maintain its upward momentum?
The ability to sustain XRP's price above $1 depends on several factors. This cryptocurrency must hold the critical support level at $1, as breaking it could trigger further sell-offs and revert to the accumulation phase.
Resistance at $1.15 will be the next critical level to potentially continue the price rally.
The broader market sentiment will also play a role, as the activity of Bitcoin and Ethereum often influences the momentum of altcoins.
Additionally, on-chain indicators such as daily active addresses and trading volume need to show signs of recovery for XRP's rally to regain new strength.
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