XRP On Edge: Supply Hits Historical High-Risk Levels, Brace For Impact?

Data shows the XRP supply in profit is currently at levels that have historically put the cryptocurrency’s price in a high-risk zone.

According to data from the on-chain analytics firm Santiment, Bitcoin, Ethereum, and XRP are assets that may be in a high-risk zone currently when compared to their historical averages.

The indicator of interest here is the “Percent of Total Supply in Profit,” which, as its name suggests, tracks the percentage of the total circulating supply of any cryptocurrency with some unrealized profit.

This metric works by going through the transaction history of each coin in circulation to see what price it was last transferred on the blockchain. Assuming that the last movement of any coin was changing hands (that is, a new holder bought it), this last transfer price would naturally reveal its profit-loss status.

If this previous price for any coin was less than the current spot value of the asset, then that particular coin can be considered to be in profit at the moment. The Percent of Total Supply in Profit adds up all such green coins and calculates what percentage of the supply they make up for.

Now, here is a chart that shows the trend in the Percent of Total Supply in Profit for Bitcoin, Ethereum, and XRP over the past few years:

As displayed in the above graph, the Percent of Total Supply in Profit has recently been at relatively high levels for all three of these assets. At present, 81% of the XRP supply is in the green, while the metric’s value is 83% and 84% in the case of Bitcoin and Ethereum, respectively.

Generally, the investors holding their coins at a profit are more likely to participate in selling, as the allure of profit-taking can be overwhelming. As such, the more holders there are in profit (or, the more supply is in profit), the more likely it is for a mass selloff to take place for the cryptocurrency.

Based on this relationship between the Percent Supply in Profit and the prices of the various assets, Santiment has defined three zones for the indicator, as the chart highlights.

Since 2018, XRP, BTC, and ETH have hovered between an average of 55% to 75% supply in profit. The assets are currently above this range, so they may be considered inside the high-risk zone.

“Crypto can absolutely still climb due to more exposure from ETFs and other positive news, explains the analytics firm. “But ideally, a great signal to watch that would imply continued long-term growth would be a breach below 75% of their supplies in profit once again.”

XRP has been unable to recover from its crash near the start of the month, as its price is still trading around $0.56. And given the current still-high supply in profit, the pain might only grow deeper for the asset’s holders soon.