Ripple’s XRP has surged nearly 10% in the past week, benefiting from a broader market uptrend. As of now, the fourth-largest cryptocurrency by market cap trades at $2.33.
However, on-chain indicators suggest XRP may be overvalued, raising concerns of an upcoming price correction as traders look to secure profits.
XRP Overvaluation Signals Potential Decline
MVRV Ratio Suggests Profit-Taking
A key metric flashing warning signs is XRP’s Market Value to Realized Value (MVRV) ratio. The one-day and seven-day averages stand at 7.21% and 3.68%, respectively.
This ratio measures whether an asset is overvalued or undervalued based on its market and realized values.
- A negative MVRV suggests an asset is undervalued, meaning its market price is lower than its realized value.
- A positive MVRV, like XRP’s current reading, indicates overvaluation, creating an opportunity for holders to sell at a profit.
With XRP trading at a premium, investors may start cashing out, increasing selling pressure and driving prices lower.
Network Realized Profit/Loss Supports Bearish Outlook
Another concerning metric is XRP’s Network Realized Profit/Loss (NPL), currently at 4.15 million.
NPL tracks how much profit or loss investors realize when selling their holdings.
- A positive NPL means more investors are selling at a profit, which increases the asset’s market supply.
- If demand doesn’t match the sell-off, XRP’s price could decline further.
XRP Faces Selling Pressure – What’s Next?
At $2.30, XRP has already dropped 3% in the past day. If profit-taking continues, the selling pressure could intensify, pushing the price down to $2.13.
Key Levels to Watch
- Bearish Scenario: If $2.13 fails to hold, XRP could extend its decline toward $1.47.
- Bullish Scenario: If profit-taking slows, XRP could regain momentum and rally toward $2.61.
Final Thoughts
XRP’s strong MVRV and NPL readings suggest investors are locking in profits, increasing the risk of a price correction. Whether XRP rebounds or extends its losses depends on demand holding up against the sell-off.