XRP has finally broken free, reclaiming the crucial $1 price level. The cryptocurrency even hit $1.10, ignite hope among investors that brighter days might lie ahead. However, the rally has hit a potential snag: a massive decline in trading volume and network activity. These factors now cast doubt on whether XRP can hold onto its newfound momentum.

XRP’s Long-Awaited Breakout

XRP’s climb to $1 represents more than just a number—it’s a psychological milestone for the cryptocurrency. For months, XRP struggled to overcome resistance levels, stuck in a sideways trading pattern. The recent rally comes as part of a broader market recovery, with Bitcoin leading the charge and pulling altcoins like XRP along for the ride.

At its peak, XRP managed to touch $1.10, bolstered by a wave of buying pressure. However, the rally’s foundation appears shaky, with several market indicators suggesting that this upward momentum might not last.

Volume Plummets by Over 75%

One of the most glaring issues facing XRP is the dramatic decline in trading activity. On November 17, XRP’s trading volume soared to over 24 billion, reflecting the intense enthusiasm surrounding its price breakout. Yet, just three days later, this figure plummeted to 5.49 billion—a 77% drop in a matter of days.

In dollar terms, the situation is equally concerning. XRP’s trading value has tumbled from nearly $3 billion to just $207 million, a sharp contraction that raises alarms about market participation.

Trading volume often serves as a barometer of investor interest and activity. A sustained rally typically requires consistent, high trading volume to validate price movements. The current decline suggests that enthusiasm for XRP might be waning, with fewer traders stepping in to support the price.

Fewer Active Addresses Signal Slowing Demand

Adding to the concern is a decline in daily active addresses on the XRP ledger. This metric, which measures how many unique users interact with the network, has dropped significantly since the rally began.

A thriving cryptocurrency network relies on robust user engagement. When daily active addresses decline, it often signals a dip in demand, as fewer people are using the asset for transactions or trades. For XRP, this drop in activity could hinder its ability to sustain the $1 level in the coming weeks.

What’s Driving the Decline?

Several factors could explain the sudden drop in trading volume and active addresses:

1. Profit-Taking: Many traders likely capitalized on XRP’s breakout, selling their holdings to secure profits.
2. Market Caution: The broader crypto market has seen similar declines in volume, suggesting that investors are exercising caution after recent rallies.
3. Overbought Conditions: XRP’s Relative Strength Index (RSI) recently hit 82.69, an overbought level that often precedes a price pullback.

Key Levels to Watch

As XRP hovers around the $1 mark, two critical levels will determine its next move:

1. Support at $1: Holding above this level is vital for preventing a larger sell-off. If XRP slips below $1, it risks falling back into a prolonged consolidation phase.
2. Resistance at $1.15: Breaking through this barrier could reignite bullish momentum, paving the way for a sustained rally.

Can XRP Hold Its Ground?

For XRP to maintain its position above $1, it must address the ongoing decline in trading volume and network activity. On-chain metrics, such as daily active addresses and transaction volumes, need to show signs of recovery to bolster investor confidence.

Additionally, the broader market will play a significant role. Bitcoin and Ethereum’s performance often sets the tone for altcoins like XRP. If the market leaders continue their upward trends, XRP could find the support it needs to stay above $1.

Conclusion

XRP’s return to the $1 level is a notable achievement, but the path ahead is uncertain. With trading volume and user activity declining, the cryptocurrency faces significant challenges in sustaining its rally.

Investors should keep a close eye on key technical levels and market trends in the coming days. While XRP’s potential remains strong, its immediate future depends on renewed enthusiasm and consistent market participation.