Could Ripple (XRP), which started its bull run in the last quarter of 2024, be overvalued?
Although there was an expectation that the XRP price would correct after the big rise in November, this correction has not happened yet. However, according to onchain data, XRP may be overvalued according to current market conditions. So, what does onchain data say about XRP?
About a month ago, the XRP price managed to break through the $1 level after a long hiatus. While some analysis predicts that XRP could rise to $5, onchain data suggests that this target could be achievable. One of the indicators that aligns with this view is the Network Value and Transaction Rate (NVT) ratio.
The NVT ratio measures the ratio of an asset’s market value to its trading volume. A decreasing ratio indicates that transactions on the network are growing faster than its market value, which generally indicates that the asset is undervalued and has the potential to rise in price.
However, an increase in the NVT ratio indicates that the market cap is increasing faster than the trading volume and the asset is entering the overvaluation zone. According to Santiment data, XRP’s NVT ratio is currently at 477, which indicates a high value.
Another indicator is the divergence between price and daily active addresses (DAA). The price-DAA divergence compares the level of user interaction with the price increase. When this indicator increases, it is considered that user interaction supports the price movement and is a positive sign.
However, currently, the DAA mismatch has decreased by -326.1%, indicating that the number of wallets interacting with XRP has decreased. If this trend continues, the XRP price may be likely to drop below $2.
