XRP experienced one of its most significant rallies ever in this cycle, reaching a new all-time high. However, with the broader cryptocurrency market turning extremely volatile, the price of altcoin has now fallen dangerously close to the $1 mark. Despite the notable decline, on-chain metrics suggest that the altcoin could still be set for more downside movement in the upcoming weeks and months.
XRP Is Facing Bear Market Threat
The XRP bloodbath has continued after falling by nearly 20% on Thursday, with the price of the altcoin now positioned at $1.22. Meanwhile, fresh data are flashing strong warning signs about a potential continuation of the current downward trend.
Advanced investment and on-chain data analytics platform, Alphractal, has outlined a growing cluster of on-chain and market metrics, which suggests that XRP may be approaching the edge of an aggressive bear market phase. Liquidity, holder behavior, and derivatives positioning indicators are starting to line up in a manner that has historically preceded more dramatic declines.
Specifically, 3 different key metrics are hinting at this impending bear market phase for the leading altcoin. These metrics include the Realized Cap Impulse, the MVRV Z-Score, and the Net Unrealized Profit and Loss (NUPL).
Currently, data from Realized Cap Impulse shows that new capital is flowing out of XRP. As for the MVRV Z-Score, which is sitting right on a key level, the metric hints at either a bear market continuation or the last on-chain support. Meanwhile, the NUPL is also at its transition line, and a further drop implies that most XRP activity will shift into unrealized losses.
XRP is now sitting exactly at a critical on-chain transition point. In other words, the altcoin is in a fragile state. If the price declines a little more, the data suggests conditions could deteriorate fast, paving the way for an extended bear market and potential capitulation phase.
Alphractal also highlighted that if the 3 metrics display extended weakness, the ongoing selling pressure will probably increase in the upcoming days. Thus, this makes the moment a crucial one for monitoring and for making data-driven decisions in order to position ahead of possible upside or downside moves.
Short-Term Holders Are The Major Sellers
XRP’s current downtrend is not entirely a surprise, given the growing selling pressure from its holders. Steph is Crypto, a market analyst and trader, disclosed that the renewed selling activity is emerging from the short-term holders, who appear to be the primary source of distribution.
Data shows that wallet addresses aged between 1 week and 1 month have experienced a drop from 5.27% to 3.6% in the past few days. Meanwhile, wallet addresses that fall under the 1-month to 3-month category are down from 11.53% to 9.29%. When newer market players are offloading their positions in volatile conditions, it is often caused by weak conviction in the altcoin and higher risk tolerance.
While these short-term holders are constantly selling their coins, Steph is Crypto highlighted that long-term holders are doing the opposite. These investors are not selling and are holding on to their coins. For now, only weak hands are the ones that are selling in the market.
Featured image from Freepik, chart from Tradingview.com
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