Ripple (XRP) Faces Downward Pressure After Recent Highs
Ripple’s XRP is showing signs of potential decline after a three-day losing streak. Market sentiment appears to be leaning bearish, especially after XRP hit a new high of $3.66 on July 18th. Traders are exhibiting risk aversion, contributing to the downward pressure.
Key indicators suggest this decline could continue through the weekend. Factors like funding rates and Open Interest (OI) in the derivatives market point towards further price suppression. The XRP Active Addresses metric also reflects a lack of strong bullish conviction, potentially keeping prices down in the near term.
User Engagement Declines, Potentially Extending XRP’s Downturn
Participation on the XRP Ledger (XRPL) has significantly decreased from its recent peak. CryptoQuant’s Active Addresses metric, which tracks the number of addresses interacting with the protocol by sending or receiving XRP, has fallen to an average of 28,000. This represents a 44% drop from the 50,482 recorded on July 18th.
If user engagement continues to decline, speculative demand for XRP could also decrease. This would deprive the token of the bullish momentum needed to sustain an upward trend. The declining engagement also highlights a lack of conviction among token holders as market sentiment turns bearish.
The derivatives market is also showing signs of weakness. Open Interest (OI) for futures has fallen to $9 billion after reaching a peak of $10.94 billion on Tuesday. OI measures the total value of capital invested in XRP derivatives at a given time.
A persistent decline in OI suggests that traders’ confidence in the token is waning. Investors may be aligning with a risk-off sentiment and reducing their investments amid changing market dynamics.
The weighted funding rate chart confirms the reduction in bullish momentum and signals a steady increase in bearish sentiment. Fewer traders are leveraging long positions, a bearish sentiment is developing, and a buying opportunity could emerge if investors identify a suitable entry point.
Technical Analysis: XRP Signals Bearish Trends
XRP bulls are struggling to maintain support at $3.00. Key technical indicators suggest that supply could continue to outweigh demand in the short term. The Relative Strength Index (RSI), previously overbought, remains downward-oriented at 55, reinforcing bearish momentum amid declining buying pressure.
Traders are likely to maintain a risk-averse stance, especially with the Moving Average Convergence Divergence (MACD) indicator confirming a sell signal on the daily chart. This signal occurred when the blue MACD line crossed below the red signal line on Friday. Expanding red histogram bars below the zero line, amid increasing volume, would further support bearish control.
Traders should monitor price action below the short-term support of $3.00. A break below this level could extend the bearish reach by 6% to the 50-day Exponential Moving Average (EMA) at $2.66 and by 18% to the 100-day EMA at $2.48.
Cryptocurrency Metrics – Frequently Asked Questions
The developer or creator of each cryptocurrency decides the total number of tokens that can be minted or issued. Only a certain number of these assets can be minted through mining, staking or other mechanisms. This is defined by the algorithm of the underlying blockchain technology. Since its creation, a total of 19,445,656 BTC have been minted, which is the circulating supply of Bitcoin. On the other hand, the circulating supply can also decrease through actions such as token burning or mistakenly sending assets to addresses of other incompatible blockchains.
Market capitalization is the result of multiplying the circulating supply of a given asset by its current market value. In the case of Bitcoin, the market capitalization at the beginning of August 2023 exceeds $570 billion, which is the result of the more than 19 million BTC in circulation multiplied by the price of Bitcoin, which is around $29,600.
Trading volume refers to the total number of tokens of a specific asset that have been traded or exchanged between buyers and sellers within a set trading schedule, for example, 24 hours. It is used to measure market sentiment, this metric combines all volumes from centralized and decentralized exchanges. Increased trading volume often denotes demand for a particular asset, as more people are buying and selling the cryptocurrency.
The funding rate is a concept designed to encourage traders to take positions and ensure that perpetual contract prices match those of spot markets. It defines an exchange mechanism to ensure that future prices and periodic price payments converge regularly. When the funding rate is positive, the price of the perpetual contract is higher than the market price. This means that traders who are bullish and have opened long positions pay traders who are in short positions. Conversely, a negative funding rate means that perpetual contract prices are lower than the reference price, so traders with short positions pay traders who have opened long positions.
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