Is XRP Overpriced to Buy at This Time?

XRP has increased by over 600% since November, reaching a market capitalization of approximately 190 billion dollars, as the market assesses the resolution of the Ripple lawsuit, regulatory clarity in the United States, and the increasing momentum of ETFs.

But with such a rapid price increase, can the fundamental factors of XRP keep up with the price? Let's take a closer look. The Valuation of XRP is Over 2,200 Times Higher Than TVL As of Monday, the parent chain of XRP, XRP Ledger (XRPL), has a total value locked (TVL) of $87.74 million, according to DefiLlama.

The trading volume on the decentralized exchange (DEX) of XRPL is $49,621 in the last 24 hours, while the application fee is only $1,467. Based on this data, the market capitalization of XRP is more than 2,200 times the TVL of DeFi and about 363,000 times the annual fee revenue. For XRP speculators, the current valuation reflects confidence in the future growth of XRPL: payment volume, growth of stablecoins, company treasury allocation, and ETF capital flows will increase significantly. In their view, these drivers will justify the current price, even if on-chain usage remains relatively modest at this time. According to data from RWA.xyz, XRPL holds $175.9 million in tokenized assets, increasing by 52.25% in one month, led by U.S. Treasury bonds (120.6 million), public stocks (55.4 million), real estate (4.3 million), and stablecoins (67.3 million).

This rapid growth rate is ranked among the fastest in the field of tokenized Real World Assets (RWA), indicating the scalability of use cases that could drive the demand for XRP in the future. XRP is said to be far behind the leading layer 1 blockchain, Ethereum. As of Monday, the market capitalization of Ethereum has reached over 516 billion dollars, with a TVL of 92.06 billion USD and generating 10.48 million USD in daily application fees. Ethereum also leads the RWA rankings with 7 billion dollars in projects under management.

This makes the market capitalization/TVL ratio of Ethereum reach 5.6 and the market capitalization/annual fee ratio reach 135, much lower than that of XRPL. However, XRP is traded at nearly 40% of Ethereum's market capitalization, leading some analysts to call it "overvalued."

XRP Bearish Divergence Indicates a 25% Correction Technically, the recent price increase of XRP shows signs that the upward momentum is slowing down. The increasing bearish divergence between the price and the relative strength index (RSI) indicates that buying pressure is weakening even as the price rises higher, a setup that often precedes corrections. XRP may face an initial pullback to the 20-2W exponential moving average (EMA 20-2W; the purple wave) is nearing $2.32 in September, down more than 25% from the current price.

A similar decline occurred after the bearish divergence signal in the 2017–2018 cycle. The level of $2.32 is even more notable as it is close to the actual price of XRP over the past six months, essentially representing the average price at which current holders purchased their tokens during that time.

The actual price of XRP could act as a magnet if the momentum fluctuates, with the potential for a retest that will shake out weaker users before any recovery occurs. However, some technical analysts still believe that the price of XRP will rise up to $10 in the coming months.

XRP2.95%
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