Ripple’s XRP has hit a rough patch, losing 12% of its value within 24 hours and falling to fourth place in the cryptocurrency market rankings. Once a top-performing digital asset, XRP saw its market cap shrink to $127 billion, allowing Tether (USDT) to reclaim the third spot with $135 billion.

The abrupt price drop follows a remarkable November rally that saw XRP surge by 344%, far outpacing Bitcoin’s 44% growth over the same period. However, the token’s rapid rise now seems to have been unsustainable, as the market undergoes a significant correction.

What Happened to XRP?

At the start of December, XRP was trading at $2.57. By the end of the day, it had fallen to $2.25, signaling a steep decline. Trading volumes also plummeted, dropping by 46% to $23.28 billion.

This dramatic reversal has caught the attention of both traders and analysts. Despite optimism among Ripple’s community that XRP might break its previous all-time high of $3.84, the token’s latest performance suggests it has hit a roadblock.

Key Reasons Behind XRP’s Drop

Several factors contributed to XRP’s price slump, revealing vulnerabilities in the recent rally:

1. Natural Market Correction: XRP had been trading above its short- and long-term moving averages, a typical indicator that prices were stretched. A return to average levels was expected, and the pullback aligns with this pattern.
2. Overbought Conditions: Technical indicators such as the Relative Strength Index (RSI) and Stochastic Oscillator showed XRP was overbought, signaling weakening bullish momentum.
3. Reduced Demand: The surge in XRP’s price in November was driven by high demand, but as that demand cooled, it left the token exposed to a downturn.

Ripple’s Community and Market Sentiment

Ripple supporters had pinned their hopes on XRP setting a new all-time high, but the recent correction has tempered those expectations. Market analysts had warned that the rally might not last, pointing to a combination of technical signals and broader market conditions.

While the drop is disappointing, it doesn’t erase XRP’s potential. The $2.25 price level could act as a crucial support point. If this holds, the token might regain its footing and push for recovery.

A Broader Look at Cryptocurrency Trends

While XRP struggles, Bitcoin (BTC) is showing resilience. BTC rebounded to $98,000 after hitting a low of $93,913 earlier in the week. Positive developments, such as pro-crypto political appointments and Federal Reserve Chairman Jerome Powell’s remarks about Bitcoin being a rival to gold, have bolstered confidence in BTC.

The divergence between XRP and Bitcoin highlights the highly dynamic and unpredictable nature of cryptocurrency markets.

What’s Next for XRP?

For XRP to recover, it needs to stabilize at its current support levels and regain investor trust. The next few weeks will be crucial in determining whether XRP can overcome this setback or face further declines.

Investors and traders should closely monitor technical indicators, market trends, and broader economic developments to understand XRP’s potential trajectory. While the recent drop has raised concerns, it could also present buying opportunities for those confident in the token’s long-term prospects.

XRP’s Downturn: A Temporary Setback or Long-Term Concern?

The recent 12% plunge in XRP’s value has drives debates among market watchers about the token’s future. While some view the drop as a natural correction following November’s explosive rally, others see it as a sign of deeper issues. A cooling demand for XRP, combined with overbought technical indicators, highlights the fragility of its recent growth.

Despite the short-term setbacks, XRP’s long-term potential remains a topic of optimism. Ripple’s ongoing efforts to expand its utility in cross-border payments and its robust community support could act as a foundation for recovery. However, the next move will largely depend on whether XRP can hold above critical support levels and reignite buying interest among traders.