XRP traders are facing a mixed bag of signals as the altcoin shows early signs of a potential recovery, but there are concerns that even millions in liquidity inflows may not be enough to fuel a sustained rally. While an emerging bullish pattern and rising market activity may suggest positive movement ahead, the coin's price has struggled to show decisive gains in recent days.

Bullish Signals: Inverted Head and Shoulders Pattern

At press time, XRP was exhibiting an inverted head and shoulders pattern on the 4-hour chart—a typical indicator of a potential price rally. This technical formation often signals a bullish reversal, and if history is any guide, it could see XRP’s price rise to around $2.5, a level it last reached on March 24, 2025. However, despite this chart formation, XRP’s price had only dipped slightly by 0.74% within the last 24 hours, reflecting the market’s uncertainty.

Liquidity Inflows and Market Sentiment

XRP’s bullish sentiment has been further fueled by substantial inflows into the market. In the past 24 hours, traders purchased a staggering $11 million worth of XRP from exchanges and transferred the tokens to private wallets. This behavior often suggests increased investor confidence, as transferring assets to private wallets can indicate a long-term holding strategy rather than short-term speculation.

On top of this, options traders are actively participating, with volumes surging by 256%. Open interest in XRP options has reached $220,860, signaling that many traders are opening new positions, betting on the coin's upward movement.

Additionally, spot market traders are aligning with this optimistic outlook, further suggesting a potential upward trend. The transfer of XRP into private wallets could lead to a supply squeeze, which would make the asset scarcer and potentially drive up its price if demand remains strong.

Concerns Over Falling On-Chain Activity

Despite the positive technical indicators and increased market activity, there are concerns about XRP's future trajectory due to weakening on-chain metrics. The number of executed transactions has dropped significantly, plummeting from 1.56 million to just 660,000 in the last 24 hours. This sharp decline points to a reduction in the number of XRP transactions, which could signal that the token is not being used as actively as it once was.

Similarly, active accounts—particularly senders—have also fallen drastically, from 20,700 to a mere 8,500. This drop in user activity could slow down any potential rally, as fewer transactions could signal a lack of broader interest in the token, especially in light of the increasingly bearish market sentiment.

The Risk of a Delayed Rally

Although XRP is experiencing some positive technical and market activity, these bearish on-chain indicators could present a significant hurdle. The sharp decline in executed transactions and the drop in active accounts may indicate that the token’s demand and adoption are not matching the optimism seen in the derivatives market. Without a substantial uptick in on-chain activity, the anticipated rally could be delayed or may not materialize as expected.

The divergence between the bullish sentiment in options and spot markets and the declining on-chain activity suggests that XRP’s price could struggle to gain momentum, at least in the short term. As a result, traders should exercise caution and keep an eye on these key metrics, as they could be crucial in determining whether XRP can break out of its current stagnation or if further downside pressure looms.

Looking Ahead: Market Sentiment and XRP’s Path

XRP’s path remains uncertain, as traders weigh technical indicators against on-chain metrics. While $11 million in inflows and an inverted head and shoulders pattern are promising signs, the drop in on-chain activity raises concerns about the altcoin’s potential to sustain a rally. Investors will need to closely monitor XRP’s transaction volume, active account numbers, and overall market sentiment to gauge whether the altcoin can rebound or if its price will continue to languish.

With so much conflicting data, XRP traders should remain cautious in the face of uncertainty and be prepared for volatility in the coming days.