Ripple's XRP has been on an upward trend since June 22, surging nearly 30% in the past two weeks. This price rally is partly driven by renewed interest across the market, pushing many assets to multi-week highs. However, there is a notable point. Despite the optimistic sentiment, two key on-chain signals suggest a potential price pullback.
XRP's Price Surge Faces Challenges As Long-Held Coins Return To The Market
Since XRP dropped to its cycle low of $1.90 during the trading session on June 22, its price has maintained an upward trend. Increasing nearly 30% since then, this altcoin is currently trading at $2.58.
Since the price rally began, the Dormancy Flow of XRP has been steadily increasing. On-chain data shows that this metric also hit a yearly low on June 22, but has been trending upwards since then. At the time of writing, the Dormancy Flow reached 1.19 billion XRP.
Dormancy Flow indicates whether long-term holders (LTHs) are actively spending or still holding. When this metric decreases, particularly to record lows, it suggests that the coins being traded are still quite 'young', and long-term holders remain inactive.
This occurs in a bear market or accumulation phase, when prices are low and confidence is high among long-term holders.
Conversely, like XRP, when the Dormancy Flow of an asset increases, this indicates that old, inactive coins are being moved or sold. This activity is often seen in the later stages of a bull market when long-term holders begin to take profits after a significant price increase.
The increasing Dormancy Flow of XRP reflects that seasoned investors are confident enough to sell, a trend that could lead to a bearish reversal in the coming days.
Traders May Want To Lock In Profits
Additionally, according to Glassnode, XRP's Net Unrealized Profit/Loss (NUPL) index puts the market in a 'trusting' state. At the time of reporting, this metric stood at 0.56 and continues to rise.
NUPL measures the difference between the current price of an asset and the price at which its coins were purchased. When this metric enters a Confidence phase, it signals that investors are holding substantial unrealized profits.
If this happens after a long period of low prices - as seen with XRP - then holders may increasingly feel tempted to sell and secure profits.
When LTHs have started moving their coins, this phase may trigger a wave of selling pressure, potentially causing a short-term price correction for XRP.
XRP Bulls Show Signs of Exhaustion
On the daily chart, XRP's Relative Strength Index (RSI) indicates that the market may be overheating. At the time of writing, the token's RSI is above 70, reaching 72.95, signaling an impending exhaustion of buyers.
The RSI indicator measures the overbought and oversold conditions of an asset in the market. This indicator ranges from 0 to 100. Values above 70 indicate that the asset is overbought and may soon decline, while values below 30 suggest that the asset is oversold and may recover.
At 72.95 and continuing to rise, XRP's RSI indicator signals that the price uptrend may soon cool off. Traders may interpret this as a profit-taking signal, adding further pressure to XRP's price. If demand stagnates in the next few trading sessions, XRP's price could drop to $2.45.
However, if buying pressure continues to increase, XRP could rise to $2.65.