XRP’s Diminished Correlation With Bitcoin Suggests Challenges Ahead Amid Rising Dormant Supply and Key Price Levels

• XRP’s correlation to Bitcoin has recently dropped to 0.4, signaling a potential weakening of investor support and risking further isolation-driven declines.

• Interestingly, the dormant XRP supply within the 3–6 month range is on the rise, indicating maturing holders and stronger hands that may mitigate short-term volatility.

• XRP is currently facing resistance at $2.58 and support at $2.12; maintaining above $2.27 could facilitate a rebound toward $2.38, potentially negating near-term bearish trends.

This article provides an analysis of XRP’s current performance, examining its correlation with Bitcoin, investor behavior, and potential price movements, with a focus on key support and resistance levels.

XRP Loses Its Bitcoin Backing

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

Historically, a weakened correlation has often resulted in declines for XRP, which previously experienced a substantial 22% price drop. However, following that drop, the asset did manage to recover.

Given Bitcoin’s recent achievement of a new all-time high (ATH), the declining correlation might be interpreted as a sign of diminishing support for XRP.

Typically, Bitcoin’s robust performance tends to lift altcoins like XRP, but this disconnect raises concerns about XRP’s ability to benefit from Bitcoin’s success. The diminishing correlation suggests that XRP may encounter additional challenges in the near term.

Contrasting with the weakening correlation to Bitcoin, investor behavior around XRP demonstrates a more stable trend. The total supply of XRP that has not changed hands for 3 to 6 months has been consistently increasing this month.

This trend indicates that short-term holders (STH) are transitioning into mid-term holders, which is a positive indicator of growing stability and confidence among XRP investors.

The increasing supply of dormant XRP suggests that more investors are choosing to hold their tokens instead of selling, creating a buffer against volatility and potentially sustaining the asset’s value during uncertain market conditions.

XRP Price Could Bounce Back

XRP is currently trading at $2.26, recently slipping below the crucial support level of $2.27. The price has been on a steady decline over the last two weeks, largely due to its struggle to break through the $2.58 resistance.

The continued decline raises concerns about mounting downward pressure on the asset. If this trend persists, XRP may test the next significant support level at $2.12, which would represent a considerable loss for investors. Such declines could foster increased bearish sentiment and enhance selling pressure.

Nevertheless, if investor support strengthens and stabilizes XRP’s price, holding above the $2.27 support level could allow for a rebound toward $2.38 or even higher, thereby invalidating the current bearish sentiment.

This potential stabilization may set the stage for a renewed attempt to breach the $2.58 resistance, possibly propelling the price upward once again.

Conclusion

In summary, while XRP faces a challenging landscape characterized by a decreasing correlation with Bitcoin and fluctuating prices, signs of increasing investor stability could provide a counterbalance. Monitoring key support levels will be essential to gauge XRP’s near-term prospects.