XRP’s NVT Ratio Signals Overvaluation

The Network Value to Transaction (NVT) ratio for XRP highlights a potential risk of overvaluation despite its recent rally.

XRP’s price has enjoyed a recent rally, but several metrics now point toward a potential risk of overvaluation.

One key indicator is the Network Value to Transaction (NVT) ratio, which highlights a concerning divergence. The metric compares an asset’s market capitalization to its transaction volume, offering insights into whether its price is sustainable.

XRP’s NVT ratio has seen sharp fluctuations in December, indicating instability. The current spike in the ratio reflects a disconnect between XRP’s price and the underlying transaction activity on the network.

While the price sits at $2.23, the high NVT ratio signals that market cap growth is outpacing network utility, a bearish sign. Unless transaction volumes catch up, XRP may face heightened correction risks, challenging the bullish momentum observed in recent weeks.

Another metric raising concerns is the Price-Daily Active Addresses (DAA) divergence, which reveals a concerning trend for XRP’s rally. This metric assesses whether price movements align with user engagement on the network.

As XRP’s price surged to $2.23, the DAA divergence has plummeted by 326.13%. This stark decline indicates a drop in the number of active XRP wallets interacting with the token.

Such a sharp divergence suggests that the recent price spike is not being supported by robust on-chain activity.

If user engagement remains low, it could undermine XRP’s bullish momentum and increase the risk of a significant price correction, putting its current rally under pressure.

Finally, a glance at the 4-hour chart reveals XRP remaining under bearish pressure. The price attempted to reach $2.40 but faced resistance at $2.35, causing a pullback to $2.31. The MACD indicator shows that the 12- and 26-period EMAs are in the negative region, reinforcing bearish sentiment.

With declining momentum, XRP risks further drops to $2.05 and potentially $1.90 in a strongly bearish scenario. However, renewed buying interest could push the price back to $2.73.

As the token consolidates around $2.24, traders should watch for either a breakout above $2.35 or a continued downtrend.

The MACD’s position highlights caution for bullish expectations in the short term