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Recently, XRP has been one of the most unexpected performers in the cryptocurrency market soaring above $2.60 in dramatic upward movement and breaking through several resistance levels. This strong rally, which was driven by the expanding market and hope for Ripple's business and legal developments, was one of the largest price expansions for XRP this year.
On-chain data, however, is presenting a less exuberant picture behind the scenes despite the price action being explosive. In particular, over the last two weeks, the volume of XRP payments between accounts, a critical measure of real usage and demand, has fallen by almost 50%.
This amount was close to one billion XRP transferred daily by the end of June. It has now decreased to about 500 million as of July 10. This contraction indicates that XRP's transactional backbone is not keeping up with the high levels of market enthusiasm and speculative buying pressure. This disparity between price and network usage frequently increases the risk of volatility.
In the past, the most resilient rallies for XRP have taken place when price action was accompanied by increases in payment volume and network activity. According to today's divergence, traders are pushing the price without a commensurate increase in the natural demand for XRP's fundamental use. In theory, the asset still appears to be strong. The hardest-to-break resistance area since the year began was removed by the breakout above $2.50.
XRP has a great chance to retest $3 if it can consolidate above this level. But if the volume of payments keeps declining, it might lead to profit-taking and jeopardize the rally's viability. Investors should closely monitor any recovery or stabilization of the payment metrics. Persistently weak transaction flows may be a sign that the rally is faltering. But if demand picks up and the price stays above $2, XRP might still have enough traction to keep rising toward multi-year highs.
Dan Burgin
Vladislav Sopov
U.Today Editorial Team