Ripple Price Forecast: XRP under pressure as network activity dwindles

•  XRP price struggles to hold $2.10 support amid declining network activity.
• User engagement has yet to recover from a sharp decline from the first quarter peak of approximately 612,000 daily active addresses.
• Ripple whales are increasing their holdings, hinting at an improving sentiment and a potential breakout.
• XRP trades under key EMAs as the RSI indicator nears oversold in the 4-hour chart, signaling strong bearish momentum.

Ripple (XRP) price is yet to make headway in its broader recovery potential, targeting $3.00 in the medium term. The cross-border money remittance token hovers at $2.17 at the time of writing on Monday, up slightly on the day. XRP's sluggish lock-step price action may be attributed to waning network activity despite whales' growing risk-on sentiment.

XRP price falters amid declining network activity 

The XRP Ledger is experiencing a major slowdown in network activity compared to levels seen in the first quarter. On-chain data from Santiment reveals that daily active addresses on the protocol stand at a fraction of peak levels recorded in March. 

At the height of the first quarter, the XRP Ledger posted a robust 612,000 daily active addresses, indicating strong user engagement and transaction activity. However, the chart below shows a dramatic slump through April and early May.

With only about 40,000 daily active addresses, fewer users transact on the XRP Ledger, which could point to waning interest or a lack of confidence in the asset's short-term prospects. 

XRP Daily Active Addresses | Source: Santiment

Historically, such drops in activity often precede periods of price stagnation or decline, as reduced transaction volume erodes liquidity and buying pressure. This makes the Daily Active Addresses metric an important indicator for traders as it could help ascertain the potential of the XRP price.

Despite the slump in daily active addresses, whale cohorts in the ecosystem are unrelenting in the quest to increase exposure to XRP. Large volume holders have consistently purchased XRP since early April, hinting at an improving risk-on sentiment. For instance, addresses with 10 million to 100 million coins currently account for 12.32% of XRP's total supply, representing a significant jump from 10.91% on April 1.

The green line on the chart below shows whales with between 100 million and 1 billion tokens currently hold 14.37% of XRP's total supply, up from 14.32% recorded on April 1.

XRP supply distribution | Source: Santiment

The accumulation by large holders (1 million to 1 billion XRP) is generally a bullish indicator because whales often accumulate during periods of consolidation or before anticipated price increases. This suggests that large investor cohorts could anticipate positive developments such as a settlement between Ripple and the Securities and Exchange Commission (SEC) and a potential approval of spot XRP Exchange Traded Funds (ETFs).

XRP bulls attempt trend reversal 

XRP's price holds above short-term support at $2.10, as bulls launch a new recovery attempt, targeting a rally to $3.00. However, XRP's position below the 50-, 100-, and 200 Exponential Moving Averages (EMA) could complicate matters for the bulls, challenging the anticipated breakout.

The Relative Strength Index (RSI) indicator, sitting below the midline at 43.30, signals increasing selling pressure. Yet, its upward trajectory suggests a potential rise above the midline, which could strengthen bullish momentum soon.

XRP/USDT 4-hour chart

Looking ahead, if XRP flips the 50-, 100-, and 200 EMAs into support, the technical structure would strengthen, favoring a bullish outcome. Beyond the moving averages, converging around $2.18-$2.20, resistance at the April's high of $2.36 must be broken to encourage more traders to buy XRP, anticipating an uptrend toward $3.00. 

Meanwhile, decreasing network activity might hinder XRP's bullish momentum, limiting its ability to climb higher due to weak demand. Key support levels to watch include the nearby demand zone at $2.11, the critical $2.00 mark, and the April 7 low of $1.61.