XRP Approaches Critical $2 Level: Metrics Indicate Potential for Price Recovery

XRP's price has recently faced a decline due to a bearish trend, but upcoming metrics may spur a recovery. With crucial indicators like the NVT ratio, exchange reserves, and funding rates showing shifts, XRP's future trajectory looks uncertain yet potentially optimistic.

Key Takeaways

XRP has experienced a decline due to a bearish pennant and diminishing profit margins, leading to increased market sensitivity.
A dropping NVT ratio, reduced exchange reserves, and rising funding rates suggest momentum for a price recovery.
The supply of XRP held at a profit is at its lowest since late 2024, indicating that nearly half of the circulating supply is facing unrealized losses, despite a significant price drop to $2.14, marking a 5.29% decrease in just one day.
Current data reflects an imbalance, with a majority of stress on late buyers as the market trends deeper into correction territory.
XRP's profitable supply has fallen to 58.5%, the lowest since November 2024, while 26.5 billion XRP is now held at a loss, highlighting the market's fragility.
As traders respond to increasing losses, XRP has entered a critical phase where price stability relies on renewed buyer interest in key liquidity zones.

XRP Approaches Critical $2 Level: Metrics Indicate Potential for Price Recovery

Understanding XRP's Bearish Pennant and Potential Price Movements

XRP is currently trading within a bearish pennant formation that depicts a lower-high trend on the 4-hour chart. The descending trendline plays a vital role as sellers remain alert near the $2.30 resistance area. However, buyers continue to support the $2.10 range, slowing the anticipated drop towards $2.

Despite the upward rallies, the pennant formation keeps downside risks alive. Each attempt to rally has lost momentum before reaching the upper resistance line, alongside an overall market weakness highlighted by profit-supply metrics. However, a potential reaction rally may materialize when XRP approaches the $2.00 liquidity area, historically known for strong demand.

XRP Price Action
Source: TradingView

The Decrease in NVT Ratio: Implications for XRP's Value

The NVT ratio has seen a significant drop of over 50% in just one day, indicating a surge in transactional activity compared to market valuation. This decline suggests that XRP is undervalued, as increased transaction volumes align more closely with network usage. Such heavy transactional flows often occur during major corrections, as traders actively reposition within short time frames.

This behavior helps enhance liquidity since trades shift rapidly between supply and demand on exchanges. Nevertheless, fast declines in the NVT ratio can also indicate volatility, as rapid market shifts often occur during intense liquidations. Even so, the downward trend in the NVT ratio suggests improving value flow for XRP, commonly seen before stronger recovery attempts following substantial pullbacks.

XRP Ledger NVT Ratio
Source: CryptoQuant

Exchange Reserves on the Decline: Impact on Selling Pressure

Currently, exchange reserves for XRP have dropped by nearly 3%, resulting in fewer tokens available for immediate sale on major exchanges. This decrease contributes to market stability, as fewer assets are available for forced selling during sharp downturns.

However, the bearish pennant continues to dictate short-term market trends since sellers still defend lower highs whenever prices bounce. This creates a balanced dynamic; while reduced reserves lessen the sell-side strain, the underlying technical momentum still favors sellers. Additionally, declining reserves often coincide with periods of strategic accumulation, indicating that traders are keeping assets off exchanges in anticipation of future market strength. Still, stronger demand needs to manifest before reserves can drive a true reversal.

XRP Ledger Exchange Reserve
Source: CryptoQuant

Increased Pressure from Long Traders

Funding rates have surged by more than 50%, reflecting aggressive long positions as traders expect a rebound near the $2.00 support zone. This spike in funding rates indicates confident demand, as traders leverage their positions despite the bearish market structure.

However, this could heighten liquidation risks since leveraged positions can be sensitive to rapid price shifts. Rising funding often signifies bullish expectations as traders hope for consolidation before a recovery. Moreover, this funding increase aligns with the improving metrics of the NVT ratio, reinforcing the chance of a rebound as XRP approaches deeper liquidity. Nevertheless, long traders must defend the $2.00 zone to validate their strategies and avert cascading liquidations.

XRP Funding Rates
Source: CryptoQuant

Future Outlook for XRP

XRP is building momentum for a potential recovery, as numerous bullish metrics suggest a brighter outlook. The declining NVT ratio enhances value efficiency across the network, while diminishing exchange reserves alleviate immediate selling pressure near the crucial $2.00 demand zone. Additionally, rising funding rates demonstrate that traders are increasing their long positions, anticipating a rebound.

These indicators align with the historically strong liquidity pocket around $2, typically driving significant rebounds during corrective phases. XRP currently exhibits the early signs of recovery, and its momentum will heavily depend on buyers' commitment to maintaining support in the lower regions.