XRP Loses Its Bitcoin Backing as Correlation Drops to 0.4

Following a period of sustained price growth, XRP has recently seen a slowdown in bullish momentum.

The price of XRP has seen a slowdown in bullish momentum recently, following a period of sustained price growth as the altcoin benefited from strong interest from investors, who have since begun to pull back.

While the price has been in decline, some market experts believe that the strength of investor support may prevent XRP from experiencing significant losses in the near term.

XRP Loses Its Bitcoin Backing

The correlation between XRP and Bitcoin has decreased significantly, dropping to 0.4. This marks the lowest level since February this year.

As CC 链上的观点 (Shiliajav) highlighted, whenever this correlation used to weaken in the past, XRP’s price would typically see a substantial decline, falling by 22%. However, after that drop, the asset would usually recover.

With Bitcoin recently reaching a new all-time high (ATH), the decreasing correlation could be viewed as a sign of less support for XRP.

It’s common knowledge that when Bitcoin performs well, it usually pulls altcoins with it. Thus, this disconnect might spell trouble for XRP.

Especially since, according to the same expert, the correlation coefficient has never been lower in 2023 than 0.4, which is "a very weak correlation."

"Whenever the correlation used to weaken significantly, we usually saw a 22% drop in the XRP price. After that, we saw the asset recover," the analyst stated.

This correlation might continue to decrease further in the coming weeks as Bitcoin’s price pushes to new highs and the correlation drops even lower.

In contrast to the weakening correlation with Bitcoin, XRP’s investor behavior shows a more stable trend, with the total supply of XRP that has remained untouched for 3-6 months steadily increasing this month.

This suggests that short-term holders (STH) are maturing and becoming mid-term holders, a positive sign signaling growing stability and confidence among XRP investors.

This is also evident in the fact that the 3-6 months supply on exchange is increasing, which occurs when STH become mid-term holders (MTH) by holding their tokens for a longer period without selling.

The increasing supply of dormant XRP indicates that more investors are holding onto their tokens rather than selling them. This long-term holding behavior could provide a buffer against short-term price fluctuations and help sustain the asset’s value in times of uncertainty.

XRP Price Could Bounce Back

The digital asset is currently changing hands at $2.26, having slipped below the support level of $2.27 over the last 24 hours.

The price has been steadily decreasing for the last two weeks, largely due to the inability to break the $2.58 resistance. This suggests that upward momentum is stalling, and the price could continue to face downward pressure.

If this decline continues, XRP may test the next support level at $2.12, which would mark a significant loss for investors. Further declines could increase bearish sentiment and result in more selling pressure.

However, if investor support strengthens and stabilizes the price, XRP could hold the $2.27 support level. This would allow for a potential rebound to $2.38 or even higher, invalidating the current bearish outlook.

This support could pave the way for a new attempt to break past the $2.58 resistance and potentially push the price higher.