Ripple’s XRP has experienced a significant 25% hike in the last seven days, initially reaching a high of $2.72 before retracing. However, recent data indicates that this XRP price jump may have reached a local top due to changes in the state of several indicators.

While the long-term outlook for the altcoin may remain positive, investors may need to be cautious about expecting further short-term gains. Here is why. 

The Ripple Token Becomes Overvalued, Buying Pressure Tanks

One indicator suggesting that XRP could halt its rally is the Network Value to Transaction (NVT) ratio. The NVT ratio checks whether a cryptocurrency’s market capitalization is growing faster than its transaction volume. It is a crucial metric for assessing whether a coin is overvalued or undervalued.

When the ratio declines, it means transaction volume on the blockchain has outpaced the market cap growth. In this instance, it means the crypto is undervalued, and a price increase could be close.

However, in XRP’s case, the NVT ratio has risen from 30.68 to 71.65 within the last three days. This notable surge indicates that the cryptocurrency’s market cap has grown faster than transactions on the network, suggesting that the XRP price jump could take a break and that the altcoin might be close to hitting a local top.

Beyond that, the Money Flow Index (MFI) on the daily chart seems to support this thesis.  The MFI is a technical oscillator that uses price and volume to measure buying and selling pressure.

With this data, the indicator can also tell when a crypto is overbought or oversold. When the reading is over 80.00, it is overbought. On the other hand, when it is below 20.00, it is oversold.

According to the chart below, the MFI on the XRP/USD daily chart reached 83.20 on December 3, indicating that the altcoin has become overbought. Since then, the rating has declined, in

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Author: Victor Olanrewaju