Why XRP Could Crash 20%?

• Ripple price broke below the uptrend line, indicating a change in market structure from bullish to bearish.
• On-chain data indicates a downward trend as XRP shows an increase in NPL and a decrease in daily trading volume.
• A daily candle close above $0.554 would invalidate the bearish thesis.

Ripple (XRP) price is stabilizing around $0.530 and trading in a tight range for the fourth day in a row on Tuesday. After breaking below the uptrend line last week, XRP price bounced back from the daily resistance level on Monday. This bearish price action is further supported by on-chain data showing an increase in Network Realized Profit/Loss (NPL) and a decrease in daily trading volume, pointing to a decline ahead.

Ripple price set for a downtrend

Ripple price broke below an uptrend line (drawn by connecting multiple early July lows) on October 2 after being rejected from the July 31 high in late September. Such a breakdown generally shows a change in market structure from bullish to bearish.

Moreover, XRP also closed below two crucial support levels: the 200-day Exponential Moving Average (EMA) at $0.554 and the daily support level at $0.544. On Monday, XRP rejected the daily level at $0.544 and is currently trading below it at around $0.528.

If the 200-day EMA at $0.554, which roughly coincides with the uptrend line, acts as resistance, XRP could fall 18% from its current trading level to retest the August 5 low of $0.431.

The Moving Average Convergence Divergence (MACD) on the daily chart shows a bearish crossover on October 2, giving a sell signal. It also shows red histograms below its neutral level, indicating that momentum is under bearish control.

XRP/USDT Daily Chart

The Ripple Network Realized Profit/Loss (NPL) indicator also aligns with the bearish outlook. This metric calculates a network-wide daily return on investment (ROI) based on the coin’s on-chain transaction volume. Simply put, it is used to measure market pain. Strong increases in a coin’s NPL indicate that its holders are, on average, selling their baggage at a significant profit. On the other hand, sharp declines imply that coin holders are making losses on average, suggesting panic selling and investor capitulation.

In the case of XRP, the NPL indicator increased from 13.24 million to 146.09 million between September 30 and October 1. This increase indicates that holders were, on average, taking profits and increasing selling pressure.

Graph of profit/loss made on the XRP network. Source: Sentiment

Additionally, XRP’s daily trading volume aligns with the bearish outlook. From October 2 to Sunday, Ripple’s daily trading volume fell from $3.13 billion to $704.78 million, the lowest level since early September. This decline indicates a decline in trader interest and liquidity in the Ripple blockchain.

XRP Trading Volume Chart. Source: Token Terminal

However, if XRP breaks and closes above the $0.554 level, it could extend the rally by 13% to retest the next daily resistance at $0.626.