XRP Price Drops 16% in 30 Days: Is a Bigger Correction Ahead?

XRP's price has experienced a decline over the past month due to decreased network activity and lower demand from investors. Is the token entering a deeper correction phase?

Key Takeaways

XRP's price fell 16.8% in the last month, currently trading at $2.93.
Network activity has decreased, with weekly transactions dropping by 14.8%.
The balance held by smart money investors has fallen by 80%, indicating lower confidence.
Futures traders are increasingly bearish, with total open interest dropping significantly.
A potential support level is at $2.70, with further declines possible towards $2.30.

XRP was trading at $2.93, which marks a 19% increase over the last three months and a 63% rise from its lowest point earlier this year. The token holds a market capitalization of $173.8 billion and has a daily trading volume of $6.4 billion. Much of the recent gains can be attributed to investor excitement following Ripple's important legal victory against the U.S. Securities and Exchange Commission (SEC). Additionally, market anticipation for a forthcoming spot XRP ETF may stimulate new institutional interest in the cryptocurrency.

Despite XRP's strong performance thus far in 2023, there are emerging indicators that suggest the token might be due for a correction. After reaching its peak for the year last month, XRP has already slumped by 16.8% in the past 30 days.

Data from Nansen highlights that the balance of XRP held by smart money investors has plummeted by 80% in the last month. This trend poses a risk, as knowledgeable investors frequently reduce their holdings ahead of potential market weak points, prompting retail investors to follow suit and potentially exacerbating XRP's downward movement.

Support for this notion comes from CoinGlass, where data reveals that futures traders have adopted a bearish outlook. Open interest in XRP contracts has decreased from $10.94 billion in July to $7.56 billion currently, indicating diminished speculative activity. Furthermore, the long/short ratio has dipped below 1, suggesting that more traders are betting on price declines.

Network activity also appears to be slowing down, as seen on the XRP Ledger. According to Dune, the number of weekly transactions has decreased by 14.8% to 12.4 million, with weekly active addresses down by 2.1% to 107,340. This reduction in activity is viewed by investors as a sign of weakening network demand, contributing to a pessimistic outlook for XRP.

On the technical front, XRP has fallen below both the 20-day and 50-day moving averages, indicating that bearish momentum is currently in play. The Relative Strength Index (RSI) is also showing signs of bearish divergence compared to price action. This divergence typically suggests weakness in the current uptrend, as rising RSI values fail to validate increasing price levels. Such a trend often prompts traders to lock in profits, signaling a waning interest from buyers.

The Aroon Down indicator is currently at 92.86%, while the Aroon Up indicator sits at 7.14%, further emphasizing the strength of the bearish trend.

Considering these indicators, XRP may be set for a potential correction towards the $2.70 mark, which has served as a critical support level during its decline in August. A strong breach below this support could lead to a further decline toward $2.30, aligning with the 23.6% Fibonacci retracement level.

Disclaimer: This article does not constitute investment advice. The information provided is for educational purposes only.

XRP price drop