2 On-Chain Red Flags You Should Be Aware of Could Be Halted by XRP's Rally

In Brief

• During an altcoin rally, XRP's price rose 72%, yet on-chain hints suggest possible vulnerability.
• A significant increase in XRP's exchange reserves suggests that more people are looking to sell, which could put pressure on the price.
• A decline in market sentiment is shown by a taker buy/sell ratio below one, which indicates an increasing sell-off among futures traders 

Over the past month, XRP has been among the cryptocurrency market's most notable performers. In the midst of a larger altcoin rally driven by Bitcoin's ascent to new all-time highs, its price has surged by 72%.

There is a chance of a short-term reversal, though, as two important on-chain indicators now indicate that this upward trend may be waning.

XRP traders anticipate a decline as red flashes on the chain.

First, the exchange reserve of XRP on the top exchange, Binance, has risen precipitously to its highest point of the year. On July 22, XRP's exchange reserve, which is calculated using a seven-day moving average, closed at a high of 2.98 million tokens for the year, which is worth over $10 million at current market rates, according to CryptoQuant.

More tokens are being transferred onto centralized exchanges, frequently in anticipation of sales, as an asset's exchange reserve rises. Investors may be preparing to leave investments or take gains when they move significant quantities of a coin to exchanges. 

The spike to a 2.98 million token reserve in XRP's case suggests increased selling intent. The price of XRP may rapidly experience downward pressure if buyers' demand is not comparable to or higher than this supply inflow.

Additionally, since July 10, XRP's taker buy/sell ratio has continuously stayed below one, according to data from CryptoQuant. The current value of the measure is 0.94. 

The ratio between the buy and sell volumes in an asset's futures market is known as the taker buy-sell ratio. While values below one imply that more futures traders are selling their positions, values over one indicate that there is a greater volume of buys than sells. 

Over the last two weeks, XRP's taker buy/sell ratio has fluctuated below one, which suggests that futures traders are selling off as the price of the cryptocurrency rises. If it persists, this growing sell-side pressure could lead to price decreases over the coming sessions and reflects waning confidence.

At $3.22, XRP Bulls Face a Crucial Test

XRP is currently trading at $3.47, slightly below its peak of $3.66. However, the likelihood of a short-term fall toward the $3.22 support level is increased by growing sell-side pressure.

If this floor holds, XRP may continue to drop to about $2.87.

However, the altcoin can regain its top price and possibly record additional gains above $3.66 if selling pressure lessens and new demand enters the market.