XRP consolidates as whales sell and on-chain activity declines

XRP recovery stalls amid low on-chain activity

On-chain activity on the XRP Ledger (XRPL) has remained significantly suppressed over the last few months. According to Santiment data, since June, the number of daily active addresses on the network has not exceeded 100,000.

The Daily Active Addresses chart below shows that approximately 19,200 addresses transacted on the XRPL on Thursday, compared to 581,000 in mid-June. Low on-chain activity negatively affects adoption, demand, and user engagement, making it difficult for bulls to sustain price increases.

XRP Daily Active Addresses | Source: Santiment

At the same time, large-volume investors, also known as whales, continue to offload XRP, further intensifying selling pressure. The Supply Distribution metric below shows that the cohort of investors holding between 100,000 and 1 million tokens (blue line) currently accounts for 9.81% of the total supply, down from 10.06% on November 1 and 10.21% on September 4.

Subsequently, addresses holding between 1 million and 10 million tokens (red line) account for 6.75% of XRP’s total supply, down from 9.76% on November 1 and 10.75% on September 4.

XRP Supply Distribution metric | Source: Santiment

The sharp downtrend in whale holdings backs the sticky risk-off sentiment. If it persists, recovery in the XRP price could be a pipe dream while increasing the odds of the downtrend extending significantly below $2.00.

Technical outlook: XRP consolidates amid sideways trading

XRP is trading at around $2,19 at the time of writing on Friday while holding beneath the falling 50-day Exponential Moving Average (EMA) at $2.36, the 100-EMA and 200-day EMAs at $2.51, all of which cap the immediate upside. The Moving Average Convergence Divergence (MACD) has turned higher above the signal line on the daily chart, with a widening positive histogram suggesting momentum is improving and a recovery attempt could extend if resistance at $2.36 gives way.

The descending trend line from $3.66, which marked the record high on July 18, continues to limit advances, with resistance seen at $2.66. Furthermore, the Average Directional Index (ADA) has eased to 23.96, reinforcing a waning trend and a consolidative tone. A break above the resistance cluster at the 100- and 200-day EMAs ($2.51), would strengthen the upside case, while failure ahead of the 50-day EMA at $2.36 would keep sellers in control.

Open Interest, funding rate FAQs

How does Open Interest affect cryptocurrency prices?

Higher Open Interest is associated with higher liquidity and new capital inflow to the market. This is considered the equivalent of increase in efficiency and the ongoing trend continues. When Open Interest decreases, it is considered a sign of liquidation in the market, investors are leaving and the overall demand for an asset is on a decline, fueling a bearish sentiment among investors.

How does Funding rates affect cryptocurrency prices?

Funding fees bridge the difference between spot prices and prices of futures contracts of an asset by increasing liquidation risks faced by traders. A consistently high and positive funding rate implies there is a bullish sentiment among market participants and there is an expectation of a price hike. A consistently negative funding rate for an asset implies a bearish sentiment, indicating that traders expect the cryptocurrency’s price to fall and a bearish trend reversal is likely to occur.

(The technical analysis of this story was written with the help of an AI tool)