XRP price has crashed in the past few weeks despite the ongoing momentum in the Ripple USD (RLUSD) token. It dropped to a low of $2.7020, its lowest level since July 22, and 25% below its highest point this year.
RLUSD Growth is Not Happening on XRP Ledger
The XRP price has plummeted after peaking in July at a high of $3.6565. This decline is primarily due to profit-taking following the coin’s record high.
It is common for cryptocurrencies and other assets to pull back after surging to a record high. For example, the Bitcoin price has dropped by over 11% after it peaked at its all-time high.
Another reason for the weakness is that Ripple USD (RLUSD) is growing on the “wrong” network. Data shows that the stablecoin crossed the important milestone of $700 million last Friday, marking a major development since its launch in December of last year.
The challenge, however, is that most of this growth is happening on Ethereum and not XRP Ledger. DeFi Llama data shows that the RLUSD supply on Ethereum stands at $616 million, while that on the XRP Ledger is $85 million.
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This means that Ripple Labs is the primary beneficiary of the RLUSD, as it receives the interest fee. With a market cap of $702 million, Ripple Labs is generating over $28 million, as short-term US bond yields currently stand at around 4%.
In theory, the XRP price should benefit from the growth of RLUSD if it is based on the XRP Ledger, due to the network fees associated with it. Some of these fees would be used to burn XRP tokens.
The XRP token has also struggled, as the total value locked (TVL) in the network has dropped to $92 million, down from its year-to-date high of over $120 million. This makes it a relatively small player in the DeFi industry, with nearly $300 billion in TVL.
XRP Price Technical Analysis
The daily chart shows that the XRP price has been in a strong downtrend in the past few weeks. It has crashed below the 50-day Exponential Moving Average (EMA), indicating that bears are currently in control.
The Relative Strength Index (RSI) has crossed the neutral point at 50. It has also moved below the Ichimoku cloud, confirming the bearish outlook.
Therefore, the coin will likely continue falling as sellers target the key support level at $2.3762. This is an important point as it is the ultimate support of the Murrey Math Lines, which is 15% below the current level. It will then rebound and hit the resistance point at $5 as we predicted here.
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