Four Factors Behind Current XRP Market Collapse

XRP has faced major headwind, surpassing the fundamental price thresholds of $0.60, $0.59, $0.57, and $0.55 since the beginning of the year amid several bearish factors.

Despite posting a bullish close on New Year's Day, XRP has severely underperformed this month, just 24 days into the year. The altcoin has fallen 16% this month, approaching its worst month since August 2023, when it collapsed 26.75%.

The problems of XRP have resulted in a breakout of several fundamental support levels that the asset had leveraged in the past as a powerful defense against bearish pressure. XRP first fell below $0.61 and $0.60 on January 3, and the bears thwarted an attempt to regain these price levels on January 11.

The crypto asset then fell below $0.59 on January 14, and subsequently gave up $0.57 three days later. Now, amid the latest price decline, XRP has broken above the fundamental $0.55 level and is currently struggling to stay above the $0.51 support. The basic crypto reported the following possible trajectory for the asset in a report today.

This period of sustained downtrend has taken some investors by surprise. However, others have wisely prepared for the recession, increasing their holdings in anticipation of a recovery. Those caught off guard had only one question: what exactly is behind this downtrend?

The Widest Market Collapse

The main catalyst for XRP's current decline is the recent crash in the broader crypto market caused by bitcoin (BTC). The global cryptocurrency market capitalization has lost $130 billion over the past week, falling 7.7% and causing an 11% drop in the value of XRP in the same time period.

This market-wide bearish trend began on January 11, shortly after the SEC Approved Spot ETF Products. BTC had reached a high of $48.969, resulting in a rally in the broader market, with XRP rising to $0.6240 on the day. However, the bullish momentum calmed down, sparked by significant BTC sell-offs.

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Most of these liquidations came from large Bitcoin whales and long-term holders. The Grayscale Bitcoin Trust (GBTC), which features an astronomically high 1.5% fee as an ETF, also compounded the sell-off campaign as institutional investors dumped their GBTC shares to switch to other ETF products.

This trend has exerted selling pressure on BTC, leading to a drop of 8.05% in the last week. Since XRP and the rest of the cryptocurrency market remain correlated with BTC, they have also recorded similar declines.

Absence of a Spot XRP ETF

Following the approval of spot Bitcoin ETF products and discussions about cryptocurrency exchange-traded funds, speculation arose around a XRP Spot ETF has emerged. Most industry commentators pushing this product cite XRP's unique legal clarity as a basis.

Remember that a Fake BlackRock iShares XRP ETF emerged on Delaware's official ICIS platform last November. This incident further exposed the desire for an XRP ETF. Despite sustained momentum for the product, no asset managers have applied for it.

As a result, investor confidence has declined, given XRP's unique position as a non-security. The initial expectations after Judge Analisa Torres' ruling on July 13 were an avalanche of interest and institutional demand. This has not materialized, resulting in dashed hopes.

XRP Whale Downloads

Whales have an impact on the price direction of a cryptocurrency due to their significant holdings. One of the factors contributing to the fall of Bitcoin is whale distribution. This factor is also behind the XRP price collapse as XRP whales sell some of their assets.

One of these massive movements of whales occurred on Monday, which involved the transfer of 29.1 million XRP to Bitstamp. In particular, traders move their crypto assets to the exchange when they want to sell them. The address in question was activated by Ripple.

Furthermore, Santiment data corroborates the claim of whale dumping sites. According to a chart from Santiment, despite an increase in addresses with between 10 million and 100 million XRP, those with balances between 100 million and 10 billion XRP have decreased considerably this month. This is due to a widespread sell-off.

XRP Development Activity and Market Sentiment

Another major contributor to the XRP bearish trend is the market sentiment and development activity in the XRP Ledger (XRPL).

These factors are intertwined, as more developers in a network and greater development activity tend to influence optimism among market participants.

XRP's prospects in this regard remain bleak as recently reported by The Crypto Basic. While other mainnets had thousands of monthly active developers, with Ethereum registering as many as 7,864, the XRP ecosystem only had 136 monthly active developers.

Current data suggests that XRP has 45 full-time developers while Ethereum It has 2,392. The XRP ecosystem ranks 49th on the list of networks with the most full-time developers, making it one of the worst performing mainstream blockchains in this metric.

In the report, The Crypto Basic drew attention to crypto YouTuber Moon Kambo's comments regarding the correlation between development activity and price movements. It should be noted that the media personality highlighted the impact of this metric in the previous market cycle.

Meanwhile, XRP has defended the $0.51 threshold and is currently changing hands for $0.5147. However, it remains to be seen if the asset will be able to keep the bears at bay until the next market resurgence. The 24-hour trading volume has soared 28% to $1,431,329,574 amid massive selling.