XRP NVT ratio spikes as price surge faces scrutiny

XRP’s (CRYPTO:XRP) recent surge has sparked interest among traders, but a sharp increase in its Network Value to Transactions (NVT) ratio raises concerns about the rally’s sustainability.

Data indicates XRP’s NVT ratio has surged to approximately 1,800, suggesting a significant disconnect between its market capitalisation and on-chain transaction volume.

Historically, such high NVT levels have been precursors to price corrections, implying potential overvaluation.

From 2020 to early 2021, XRP’s NVT ratio ranged between 200 and 600, signaling a balanced market.

However, spikes above 1,000 from mid-2021 to early 2022 indicated speculative-driven overvaluation.

The current high ratio hints that XRP’s price may need increased on-chain activity to maintain its momentum, making close monitoring of transaction volumes crucial.

The rise in Open Interest, now around $830 million, points to heightened speculation and leveraged positions, according to Coinalyze data.

While such spikes can drive significant price movements, they also risk volatility and potential corrections if momentum falters.

Positive funding rates further signal bullish sentiment but can lead to reversals when buying interest wanes.

At the time of reporting, XRP’s 24-hour trading volume was $6.81 billion, highlighting active market participation.

While this suggests strong liquidity, when viewed alongside a high NVT ratio and increased Open Interest, it may indicate speculation rather than organic network-driven growth.

Sustained price growth requires a balanced relationship between trading volume and genuine on-chain activity, as heavy reliance on speculative trading often results in short-term price shifts rather than long-term value appreciation.

At the time of reporting, the XRP price was $0.8018.