Is XRP overvalued? This is a topic widely discussed in the market since the explosion of altcoins in November.
While some believe that the rise in XRP's price will gradually recede, there has not been a significant adjustment so far. However, on-chain analysis suggests that compared to the overall market trend, XRP's price may soon be overvalued.
Ripple tokens face significant risks.
About a month ago, XRP's price broke through the $1 mark for the first time, drawing significant attention from the market. Some analysts believe this was just a false breakout, but this viewpoint has proven incorrect as XRP's current trading price has surged to $2.36.
Despite predictions that XRP's price could rise to $5, some on-chain indicators suggest that this target may not be easily achievable. A key indicator consistent with this discussion is the Network Value to Transactions (NVT) ratio.
The NVT ratio measures the asset's market value relative to the growth rate of transaction volume. When the NVT ratio falls, it means that the growth rate of transactions on the network is outpacing the growth of market value, which is a bullish signal indicating that the price may be undervalued.
On the other hand, the surge in the NVT ratio indicates that XRP's market value is growing at a faster pace, pushing it closer to higher valuation areas. According to Santiment's data (as shown in the figure), XRP's NVT ratio has surged to a high of 477.
Another indicator reflecting this market sentiment is the divergence between price and Daily Active Addresses (DAA). DAA measures the relationship between user engagement and price growth. When DAA increases, it means more users are participating in supporting price increases, which is typically a bullish signal.
However, as of the writing of this article, the price associated with DAA divergence has decreased by 326.13%, indicating a reduction in the number of wallets interacting with XRP. If this trend continues, XRP's price may fall below the support level of $2.
XRP Price Prediction: Momentum Remains Bearish
On the 4-hour candlestick chart, XRP's price attempted to break through $2.40 but encountered strong resistance around $2.35, causing the price to retreat to $2.31. According to the Moving Average Convergence Divergence (MACD) indicator, the 12-period and 26-period exponential moving averages have fallen into negative territory.
This bearish signal suggests that XRP is currently in a bearish momentum. If this trend continues downward, XRP's price may further test the support level of $2.05.
So, is XRP overvalued? According to current analysis, there seems to be a possibility of this. In the face of strong bearish momentum, XRP could drop to $1.90.
However, if buying pressure emerges in the market, increasing demand, XRP could also rise against the trend, breaking current resistance and potentially rising to $2.73.