Profit-Taking and Elevated MVRV Ratio Hint at Possible XRP Market Correction
XRP’s recent rally to a three-year high has seen long-term holders pocket over $1.5 billion in profits, the largest profit realization since April 2021, according to data. While profit-taking is a normal reaction following a significant rally, a combination of factors suggests a potential market correction may be on the horizon.
The Market Value to Realized Value (MVRV) ratio, a key metric used to assess overvaluation, soared to 217% on Tuesday, according to FXStreet, citing Santiment data. This indicates that XRP’s current market value significantly exceeds its average purchase price, potentially signaling short-term overvaluation.
MVRV is calculated by dividing the total market value of coins in circulation by the total realized value, representing the aggregate cost basis of all coins. A high MVRV ratio often points to overextended valuations, which could dampen further price increases.
XRP’s Surge Fueled by Positive Catalysts
XRP’s price hit a local high of $1.60 last week before settling around $1.30, still marking a 31% gain over the past week. The token has doubled in value in two weeks, driven by favorable developments, including Ripple Labs overcoming regulatory hurdles, the launch of money market funds on the XRP Ledger, and bullish technical indicators.
Adding to the momentum, Ripple Labs announced plans to invest in the newly rebranded Bitwise Physical XRP ETP, previously known as the ETC Group Physical XRP. Following the announcement, XRP rose by 10%.
The European-based ETP, now trading under the GXRP ticker on Germany’s Deutsche Börse XETRA, offers 100% physical backing, allowing investors to gain direct exposure to XRP.
“Global demand for exposure to the crypto asset class has exploded in 2024, fueled by a growing interest in crypto-backed investment offerings,” said Brad Garlinghouse, CEO of Ripple Labs. “With the U.S. regulatory environment for crypto finally becoming more clear, this trend is poised to accelerate, further driving demand for crypto ETPs, such as the Bitwise Physical XRP ETP.”
Outlook
While XRP has experienced significant gains, the combination of high profit-taking and an elevated MVRV ratio suggests a cooling-off period may be imminent. Investors should closely monitor market conditions and upcoming developments to navigate potential price fluctuations.
