XRP price has been in a strong downtrend since early January, dropping over 40% in that period. It now risks a drop to below $1 as several key metrics show significant weakness in network activity.

According to data from crypto.news, XRP (XRP) price fell over 13% this week and nearly 41% from its highest point this year. Meanwhile, its market capitalization has shrunk from $145 billion to around $85.5 billion.

This drop came as part of a broader market downturn, which has seen a brutal start to the year. The total market cap has fallen nearly 50% from last year’s peak as several macroeconomic and geopolitical factors reduced risk-on sentiment in investors who are now eyeing more traditional safe-haven assets.

For now, XRP remains at risk of further losses, specifically due to three primary reasons.

First, demand for the XRP Ledger network seems to be waning. Data from DeFiLlama show that the total value locked on the network plummeted to $48.5 million from the $80.5 million recorded in early January. The difference is even more striking when compared to the $120 million seen around mid-July last year. At the same time, weekly chain revenue has fallen to nearly a third of the levels observed last September.

Second, a look at derivatives markets shows that traders are unwinding their positions. Open interest is fleeing the futures market while the weighted funding rate has moved into negative territory. A negative weighted funding rate means the majority of traders are betting that the asset price will fall in the short term. Such negative sentiment often influences spot market activity and accelerates downward momentum.

Third, demand for spot XRP ETFs seems to have largely stalled since the start of this year as institutional investors pull back. Data from SoSoValue show that spot XRP ETFs recorded only $39 million in net inflows over the past week. This is significantly lower than the $200 million in weekly inflows recorded during the launch phase. Lack of institutional support removes a major pillar that tends to stabilize prices during bearish markets.

XRP price analysis

On the daily chart, the XRP price has respected a descending parallel channel pattern that it has occupied since mid-July last year. Typically, an asset’s price tends to remain in a downtrend as long as it remains within this bearish pattern.

XRP price has also fallen below the major support and resistance pivot point on the Murrey lines at $1.56. When an asset loses this critical level, it is expected to continue its decline toward lower support zones. The MACD lines, which were pointed downwards, added more weight to the bearish narrative.

At press time, the XRP price was sliding towards the strong pivot reverse at $1.17. If it fails to hold this level, it risks a drop to the ultimate support line at $0.78, which would represent a further 44% decline from the current price level.