XRP Signal Shows Rally Paralysis Risk

What to Know:

• XRP’s on-chain structure mirrors a precarious moment from early 2022, indicating potential sideways movement.
• Despite a healthy percentage of XRP supply being in profit, structural tension persists due to cost basis discrepancies among different holder cohorts.
• Exchange flow data suggests an ongoing accumulation bias, even with the observed cohort stress, potentially limiting significant sell-offs.

XRP’s on-chain dynamics are currently displaying patterns reminiscent of early 2022, a period that preceded prolonged sideways trading. Data indicates that short-term investors are accumulating XRP at prices below the realized price of those who have held for six to twelve months. This inversion creates a challenging environment where rallies may face resistance as longer-term holders seek to break even.

XRP’s 6-12 month cohort (yellow line) holds cost bases above current spot price, creating overhead resistance as newer buyers accumulate lower.

Santiment data reveals that over 70% of the XRP supply is currently in profit, which typically indicates a healthy market structure. However, this aggregate figure obscures the underlying tension identified by Glassnode: a significant disparity in cost bases between short-term and longer-term holders. This structural tension can lead to increased selling pressure during rallies.

XRP realized profit/loss spiked sharply in early January while the percentage of supply in profit declined from prior highs.

Analysis of realized profit and loss patterns further supports the idea of distribution during rallies. Spikes in realized profits coinciding with price increases suggest that longer-term holders are taking the opportunity to exit their positions. This behavior can cap momentum and prevent substantial upward movement in the price of XRP.

XRP’s realized profit/loss ratio spiked sharply in early January, indicating heightened on-chain spending activity during price volatility.

Despite the cohort stress, exchange flow data suggests an ongoing accumulation trend. XRP reserves on Binance show net outflows, indicating that new buyers are moving coins off exchanges into self-custody. This dynamic suggests that the overhead supply is being absorbed, which could limit the potential for a significant sell-off.

XRP exchange inflows (top) and outflows (bottom) spiked in mid-December, with outflows consistently exceeding inflows through mid-January, indicating net self-custody movement.

In conclusion, XRP’s current market structure presents a mixed picture. While on-chain data reveals underlying stress and potential overhead resistance, exchange flows point to continued accumulation. The coming weeks will be crucial in determining whether XRP can overcome these challenges and establish a sustained upward trend.

Related: Bitcoin Buy Signal: Institutions Show Eagerness

Source: Original article