XRP has encountered significant setbacks, breaking crucial price thresholds at $0.60, $0.59, $0.57, and $0.55 since the beginning of the year, influenced by various bearish factors.
Despite starting the year with a bullish close on New Year’s Day, XRP’s performance has been lackluster, with a 16% drop within just 24 days into the year. This marks its weakest month since August 2023, when it experienced a 26.75% decline.
The challenges faced by XRP have led to the breach of several essential support levels that were previously effective defenses against bearish pressures. The altcoin first slipped below $0.61 and $0.60 on January 3, and attempts to recover these levels on January 11 were thwarted by bears.
Further declines followed as XRP fell below $0.59 on January 14, subsequently dropping to $0.57 three days later. In the latest downturn, XRP has now breached the critical $0.55 level, currently struggling to maintain support above $0.51. The Crypto Basic has outlined the potential trajectory for the asset in a recent report.
This prolonged bearish phase has taken some investors by surprise, while others have prepared adequately for the downturn, bolstering their holdings in anticipation of a recovery. Those caught off guard are left with one question: What is the driving force behind this downward trend?
The Wider Market Downturn
The primary driver behind the current decline in XRP is the recent downturn in the broader cryptocurrency market, instigated by Bitcoin (BTC). Over the past week, the global cryptocurrency market cap has witnessed a loss of $130 billion, marking a 7.7% decrease and causing an 11% decline in XRP’s value during the same period.
The downturn across the entire market initiated on January 11, shortly after the SEC approved spot ETF products. BTC surged to a peak of $48,969, driving an overall market uptrend, with XRP reaching $0.6240 on that day. However, this upward momentum waned due to substantial BTC sell-offs.
The majority of these sell-offs originated from significant Bitcoin whales and long-term holders. The Grayscale Bitcoin Trust (GBTC), featuring a notably high fee of 1.5% as an ETF, further intensified the sell-off campaign as institutional investors offloaded their GBTC shares to transition to alternative ETF products.
This trend has created selling pressure on BTC, resulting in an 8.05% decline in the past week. Given the correlation between XRP and the broader crypto market with BTC, similar declines have been observed across XRP and other cryptocurrencies.
Absence of a Spot XRP ETF
In the wake of the approval of spot Bitcoin ETF products and ongoing discussions regarding cryptocurrency exchange-traded funds, speculation has arisen about the possibility of a spot XRP ETF. Many industry commentators advocating for this product highlight XRP’s distinct legal clarity as a key factor.
It is worth recalling that a fraudulent BlackRock iShares XRP ETF surfaced on the official Delaware ICIS platform last November. This incident underscored the growing interest in an XRP ETF. Despite continuous advocacy for the product, no asset manager has officially filed for it.
Consequently, investor confidence has diminished, given XRP’s unique status as a non-security. The initial expectations following Judge Analisa Torres’ ruling on July 13 were for a surge in institutional interest and demand. However, this anticipation has not materialized, leading to disappointed expectations.
Large XRP Holder Sells Off
The substantial holdings of whales wield influence over the price movements of cryptocurrencies. A significant factor contributing to the decline in Bitcoin’s value is the distribution of holdings by large holders, known as whale distribution. This factor is also playing a role in the depreciation of XRP, as notable XRP whales engage in the sale of portions of their holdings.
One notable instance of a significant whale movement occurred on Monday, involving the transfer of 29.1 million XRP to Bitstamp. It’s worth highlighting that traders often transfer their cryptocurrency assets to exchanges when they intend to liquidate them. In this case, the address in question was activated by Ripple.
Moreover, data from Santiment supports the notion of whale sell-offs. According to a Santiment chart, despite an increase in the number of addresses holding between 10 million and 100 million XRP, those with balances ranging from 100 million to 10 billion XRP have seen a substantial decrease this month. This trend is indicative of a widespread selling-off by large holders.
XRP Development Progress and Market Outlook
Market sentiment and development activity on the XRP Ledger (XRPL) play significant roles in the ongoing downtrend of XRP.
These factors are interconnected, with a higher number of developers on a network and increased development activity often influencing bullish sentiments among market participants.
Unfortunately, XRP’s outlook in this context is discouraging, as recently highlighted by The Crypto Basic. While other mainstream networks boast monthly active developers in the thousands, with Ethereum leading with 7,864, the XRP ecosystem lags significantly with only 136 monthly active developers.
Current data indicates that XRP has 45 full-time developers, while Ethereum has 2,392. The XRP ecosystem ranks 49th on the list of networks with the highest number of full-time developers, positioning it as one of the worst-performing mainstream blockchains in this metric.
The Crypto Basic’s report underscores crypto YouTuber Moon Kambo’s observations regarding the correlation between development activity and price movements. Kambo notably emphasized the impact of this metric in the previous market cycle.
Despite XRP defending the $0.51 threshold and currently trading at $0.5147, it remains uncertain whether the asset can withstand bearish pressures until the next market upswing. The 24-hour trade volume has surged by 28% to $1,431,329,574 amid the significant sell-offs.