Ripple XRP has seen a massive 25% surge in the past seven days, reaching a high of $2.72. However, recent data suggests that this XRP price jump may have reached a local peak due to changes in the status of several indicators.
While the long-term outlook for the altcoin may remain positive, investors may need to be cautious about expecting additional short-term gains. Here’s why.
Ripple Token Becomes Overvalued, Buying Pressure Declines
One indicator that XRP may be halting its rise is the market cap to transaction volume (NVT) ratio. The NVT ratio checks whether a cryptocurrency’s market cap is growing faster than its transaction volume. It is a crucial measure to assess whether a coin is overvalued or undervalued.
When the ratio drops, it means that the volume of transactions on the blockchain has outpaced the growth of the market cap. In this case, it means that the cryptocurrency is undervalued, and a price increase may be imminent.
However, in the case of XRP, the NVT ratio has risen from 30.68 to 71.65 over the past three days. This notable rise suggests that the cryptocurrency’s market cap has been growing faster than the transactions on the network, suggesting that the XRP price surge may be taking a breather and that the altcoin could be close to reaching a local top.
Furthermore, the Money Flow Index (MFI) on the daily chart seems to support this hypothesis. The MFI is a technical oscillator that uses price and volume to measure buying and selling pressure.
With this data, the indicator can also tell when a cryptocurrency is overvalued or undervalued. When the reading is above 80.00, it is overvalued. On the other hand, when it is below 20.00, it is undervalued.
As seen in the chart below, the MFI indicator on the daily chart of XRP/USD reached 83.20 on December 3, indicating that the altcoin is overvalued. Since then, the rating has declined, indicating that buying pressure is no longer as high as it was a few days ago. If the decline continues, XRP price may find it difficult to rise.
XRP Price Prediction: Below $2 Levels Coming
Further evaluation of the daily chart shows that XRP’s pullback from $2.72 helped it find support at $2.25. However, the image below reveals lower trading volume around the altcoin, suggesting that another XRP rally may not happen in the near term.
Alternatively, the bears may try to push the price further down below the support that the bulls are defending. If that happens, the price of XRP may drop to $1.85, where the 23.6% Fibonacci ratio is located.
If the selling pressure intensifies, the next target for the token could be around $1.40 at the 38.2% Fibonacci level. However, if the buying pressure increases and the MFI reading bounces off, this prediction may not happen. In this scenario, XRP could rally beyond $2.90 and reach a yearly high of $3.20.
