XRP, one of the top altcoins in the crypto market, is currently struggling to maintain its recovery momentum as it faces a key resistance level at $2.56. This month, XRP has failed to clear this barrier twice, signaling that the altcoin could continue its consolidation phase without a positive change from the market.

XRP Market Losing Momentum

One of the current warning signs is that XRP’s NVT (Network Value to Transactions) ratio – a metric that compares its market capitalization to the transaction volume on the network – has risen to a five-year high. The last time this metric reached a similar level was in January 2020.

The high NVT ratio suggests that while XRP’s market cap is growing, the actual transaction volume on the network is not commensurate. This suggests that investor optimism may be outpacing actual network activity, leading to an imbalance. Typically, when the NVT ratio is high, the market is at risk of a correction as investor excitement fades.

Declining New Investor Attraction

In addition, XRP’s macro momentum is also showing signs of strain as the network growth rate has dropped to a four-month low. This is reflected in the number of new addresses created on the XRP network, a key indicator of the altcoin’s market appeal.

The decline in the rate of new address creation suggests that XRP is struggling to attract new investors. The lack of new capital inflows could further reduce XRP’s upside potential, especially if the network fails to maintain a high level of active users.

XRP Price Struggles to Breakout

At the time of writing, XRP is trading around $2.40, just below the major resistance level at $2.56. This is a price level that XRP has failed to surpass twice this month, creating a major hurdle for the cryptocurrency’s growth prospects.

If this resistance level is not broken, XRP could continue to consolidate in the range of $2.27 to $2.56. This consolidation phase could extend if market factors remain unchanged.

In a worse case scenario, if bearish pressure increases, XRP risks sliding below the $2.27 support level. If this level is broken, the price could fall further to $2.14 or lower, erasing much of the recent recovery from $2.00.

Bullish Outlook and What It Takes

However, if XRP can successfully break above the $2.56 resistance and turn it into support, the bearish outlook will be invalidated. A successful breakout could provide momentum for XRP to move higher, with the nearest target at $2.95, and eventually the crucial $3.00 mark.

To achieve this, XRP needs strong support from investors and a more favorable market environment to sustain the rally. Long-term investor participation and new capital inflows will be crucial for XRP to exit the consolidation phase and enter a new growth cycle.

Conclusion

XRP is currently in a critical testing phase, with prices being held back by strong resistance and a decline in network growth momentum. To move out of the neutral and consolidation outlook, XRP needs a strong breakout and support from more positive macro factors in the crypto market.