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Is XRP overvalued? This is the question the broader market has been asking since the altcoin began its boom in October.
Although some hoped that the XRP price rally would subside, a significant correction has yet to occur. However, according to this on-chain analysis, it is possible that this token is about to become overvalued relative to overall market conditions.
Ripple Tokens Face Great Risk
About a month ago, the XRP price crossed the $1 mark for the first time in a long time. Some market observers believe this could be a fake. However, this feeling was wrong, as it is currently trading at $2.36.
While there are many predictions that the Token’s value could move towards the $5 mark, some on-chain indicators suggest this could be challenging. One indicator that aligns with this view is the Network Value to Transactions (NVT) ratio.
The NVT ratio measures the growth of an asset’s market capitalization relative to its trading growth. When this ratio decreases, it means that transactions on the network are growing faster than the market capitalization, which is a positive sign and shows that the price is undervalued.
Conversely, a spike in the NVT ratio indicates that the market capitalization is increasing at a faster rate, which makes it overvalued. According to Santiment, XRP’s NVT ratio jumped to a high index of 477.
Another indicator with the same sentiment is price divergence-Daily Active Address (DAA). This metric measures price growth relative to user engagement. When this index increases, it means user participation is supporting the price action, which is a positive sign.
However, as of press time, DAA’s price divergence has decreased by 326.13%, indicating a decrease in the number of XRP wallets interacting with the token. If this trend continues, XRP price could slide lower than $2.
XRP Price Forecast: Bearish Momentum Continues
On the 4-hour chart, XRP price attempted to reach $2.40. However, the altcoin faced resistance at $2.35, pulling the price back to $2.31. Observing the Moving Average Convergence and Divergence (MACD) shows that the 12 and 26 period Exponential Moving Averages are falling into negative territory.
This drop shows the bearish price momentum surrounding the Token. If momentum continues to weaken, XRP price could drop to $2.05.
So, is XRP overvalued? This analysis suggests that may be the case. In a strong bearish scenario, the Token could drop to $1.90. Conversely, if buying pressure increases, it could push XRP to $2.73.
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