XRP’s recent market volatility has left many investors questioning the catalysts behind its downturn. As the native digital token of the XRP Ledger, XRP has experienced a noticeable slide, dipping to $2.08 by May 6, 2025. This decline marks the token’s fifth consecutive session of losses, prompting scrutiny into the timing and reasons for this negative momentum.
Several technical patterns are highlighting potential risks for further downside. A descending triangle formation visible on XRP’s daily chart suggests the possibility of a sharp fall towards $1.20, provided key support zones in the $1.77 to $1.90 range are broken. This zone, repeatedly tested since December, has served as a foundational barrier. However, persistent selling pressure could challenge those levels soon.
Paul Howard, Director at Wincent, shared insights indicating that XRP is evolving away from broader market trends. Rather than tracking Bitcoin’s movements, XRP is increasingly influenced by news cycles and product-specific developments, which emphasizes its unique market behavior compared to other major cryptocurrencies.
Declining On-Chain Activity and Whale Liquidation
A major contributor to XRP’s recent weakness is the declining activity on its blockchain. Daily active addresses have dropped to 30,000, which has corresponded with decreased liquidity and impacted investor confidence. This sharp fall in user engagement suggests waning interest, particularly among retail participants.
Furthermore, significant holders of the token—commonly referred to as whales—have been observed offloading their XRP positions. This trend, dating back to the end of 2024, has continued into May, worsening the supply-demand imbalance. The data implies diminished confidence among institutional investors, amplifying current bearish conditions.
Global Economic Tensions Influencing Sentiment
Larger macroeconomic trends are casting a shadow on the broader cryptocurrency market, including XRP. Investors are closely monitoring the U.S. Federal Reserve’s next steps as it prepares to release inflation data and policy updates. The anticipation of further rate hikes or continued inflation levels is causing a market-wide pullback as traders seek safer assets.
In addition, newly introduced tariffs by the U.S. on over 100 countries have sparked fears of trade friction and a general slowdown in global economic growth. Ripple effects from these policies, especially retaliatory measures from China, triggered a $1.3 trillion reduction in overall crypto market capitalization in April. XRP’s sharp drop by almost 45% during this period reflects just how reactive the altcoin is to shifting macroeconomic conditions.
Profit-Taking and Short-Term Speculation
The recent dip in XRP prices also points toward traders consolidating and exiting positions following a meteoric 600% rise in late 2024. Profit-booking activity heightened in April, with over $1 billion worth of XRP liquidated around the $2.10 mark. This high trading volume during downturns marks clear sell-side dominance and reduced speculative appetite in the short term.
Mixed Signals from Regulatory Developments
Ripple’s legal closure with the SEC, which involved a $50 million settlement, provided clarity regarding XRP’s regulatory status. While this milestone was expected to invigorate markets, the impact was subdued, suggesting the news was already factored into current prices.
Compounding the issue, the delay in the approval of spot XRP ETFs by the SEC has further dampened market enthusiasm. Although futures-based ETFs have received a nod to proceed, they do not offer the same transformative volume or liquidity benefits that spot ETFs typically bring. Applications from prominent financial entities are now under review until mid-June, leaving investors in a prolonged state of uncertainty.
Ripple’s Strategic Focus on RLUSD
The introduction of Ripple’s stablecoin, RLUSD, has piqued institutional interest but raised concerns among long-term XRP supporters. As RLUSD gains recognition as a bridge asset for global payments, it may overshadow XRP’s prior role, leading to strategic ambiguity. Although RLUSD’s growth may eventually increase the utility of the overall XRP Ledger, for now, it contributes to market doubt regarding XRP’s future positioning.
Outlook: What Could Reverse the Trend?
Despite current market stress, there are signals that a reversal is possible. Analysts express optimism about the 77% chance of spot ETF approval by the end of 2025. A recent acceleration in token burn mechanisms on XRPL, which reduces circulating supply, also suggests potential price support if demand stabilizes.
Moreover, with leadership shifts at regulatory agencies leaning toward crypto-friendly appointments, the broader environment could evolve to favor digital assets like XRP.
For investors tracking XRP, key support levels to watch are $2.08 and $1.89. A breach below these could trigger another leg down. On the flip side, surpassing the $2.26 resistance, especially in conjunction with positive ETF news, could spark renewed upward momentum.
XRP’s current downturn is driven by a combination of negative technical signals, blockchain activity slowdown, global market headwinds, and strategic pivots within Ripple’s operations. While short-term outlooks remain cautious, longer-term prospects remain tethered to regulatory outcomes and institutional adoption.
