XRP has been making waves in the cryptocurrency market lately, with whale activity spiking and short liquidations causing ripples in the price action. While these developments hint at the possibility of a breakout, the question remains: Is this a sustained rally, or just another short-term fluctuation? Let’s break down what’s happening with XRP right now.

Whale Moves Stir Market Activity

Ripple, the company behind XRP, recently made significant moves that grabbed market attention. In a series of transactions, 300 million XRP were transferred to an unknown wallet, followed by another 70 million XRP exchanged between unidentified addresses. These whale-scale transfers, totaling a massive $782 million, often precede heightened volatility or strategic accumulation. At the time of writing, XRP was trading at $2.20, marking a 2.98% increase in the past 24 hours.

Such significant movements typically suggest that large players are positioning themselves for either a major price change or a strategic build-up in their holdings. Given the size of these transactions, it’s crucial to monitor how the broader market, both retail and institutional, reacts in the coming days.

Cautious Optimism Among Investors

Looking at the on-chain data, XRP’s exchange flow data shows that inflows totaled $122.62 million, slightly surpassing outflows at $116.44 million. This modest net positive balance indicates a cautious optimism among market participants. While the inflow is not overwhelmingly bullish, it suggests that buyers may be positioning themselves ahead of a potential breakout.

Despite this, other on-chain metrics are painting a mixed picture. The Network Value to Transaction (NVT) ratio dropped 57.13% in the last 24 hours, signaling that transaction volume is growing faster than the market cap, which typically indicates improved utility and a healthier network. This is a positive sign that XRP is becoming more fundamentally supported, even as the price appreciates.

Weakening Network Activity Raises Concerns

While the price of XRP is seeing upward movement, network activity tells a different story. XRP’s daily active addresses have fallen to 17.2K, and the total transaction count has dropped to 302K. This decline in user engagement raises questions about the sustainability of the current price rally. Rising prices typically require increased user engagement for long-term growth. Without more users actively engaging with the network, XRP may struggle to maintain its current price levels.

The MVRV Long/Short Difference for XRP is at -24.72%, indicating that long-term holders are sitting on substantial unrealized losses. Historically, such levels have often marked the bottoming phase of an asset, suggesting that accumulation may increase in the coming weeks. If XRP’s price continues to rise, this could signal that investors are positioning for a sustained rally.

Bullish Pressure Mounting from Short Liquidations

The liquidation of short positions has also been a key driver of XRP’s recent price surge. On May 8, short sellers were liquidated to the tune of $1.48 million, far outpacing the $364K in long liquidations. This creates an imbalance that reinforces bullish momentum. When short positions are liquidated, forced buybacks add upward pressure to the price, further fueling the rally.

This short squeeze indicates that bears were caught off guard during XRP’s price increase, and it could set the stage for a continued climb. However, the market remains cautious, and while short liquidations suggest growing bullish pressure, the sustainability of this momentum will depend on the next price action.

Is a Breakout Imminent?

At the time of writing, XRP was trading just beneath the upper boundary of a descending channel, near $2.18, with a key resistance level at $2.40. A breakout above this resistance could propel the price toward the $3.00 mark, signaling a reversal of the multi-month downtrend that has plagued XRP.

Despite the positive signs, XRP still faces significant hurdles. Strong support remains at $2.06, providing a cushion for bulls to defend the trend if the momentum stalls. If XRP manages to break through $2.40, it could trigger renewed bullish momentum and push the asset toward its next resistance level.

Conclusion: A Decisive Move Looms

The convergence of whale activity, short liquidations, and improving valuation metrics suggests that XRP may be approaching a critical inflection point. The current setup points toward a potential breakout, but the market’s lack of user engagement raises concerns about the sustainability of this rally. If XRP can break through the $2.40 resistance and maintain momentum, it could see a substantial upward movement. However, the next few days will be crucial in determining whether this setup leads to a sustained rally or a failed breakout.

In conclusion, while XRP’s technical indicators and whale activity suggest a breakout is possible, the weak network activity and other cautionary signs imply that traders should remain vigilant. If the current momentum holds, XRP could be on the verge of a major rally—otherwise, it may experience another period of consolidation.