Is XRP seriously overvalued? The market capitalization is 2,200 times the TVL, and the bearish divergence may trigger a 25% pullback.

Ripple (XRP) has experienced a big pump of over 600% since November last year, with its market capitalization soaring to $190 billion, nearly 40% of Ethereum's market capitalization. However, on-chain data shows that the ratio between XRP's market capitalization and its Total Value Locked (TVL) is as high as 2,200 times, far exceeding the level of mainstream public chains. On the technical side, bearish RSI divergence signals are intensifying, suggesting that the price may fall back to $2.32.

On-chain data reveals valuation bubble risk

(Source: DefiLlama)

According to DefiLlama data, the TVL of the XRP Ledger (XRPL) is only $87.74 million, while the 24-hour trading volume of decentralized exchanges (DEX) is just $49,621, and the application fee revenue is a mere $1,467.

Market capitalization/TVL ratio: 2,200 times (Ethereum only 5.6 times)

Market capitalization/annual fee ratio: about 363,000 times (Ethereum only 135 times)

This extreme gap has led some analysts to assert that the current price of XRP may have seriously deviated from its fundamentals.

Bullish Argument: Betting on the Future Growth of XRPL

Despite the current limited on-chain activity, bulls believe that the valuation of XRP reflects confidence in the future growth of XRPL, including:

The growth of settlement volume and stablecoin issuance

Corporate Capital Allocation and ETF Inflows

RWA (Real World Assets) Tokenization Scale Expansion

According to RWA XYZ data, the total amount of XRPL tokenized assets reached 175.9 million USD, an increase of 52.25% within a month, of which US Treasury bonds accounted for 120.6 million USD, ranking high on the RWA growth list.

Comparison with Ethereum

As of August 12:

Ethereum market capitalization: $516 billion

Ethereum TVL: 92.06 billion USD

Daily transaction fee revenue: $10.48 million

market capitalization/Total Value Locked ratio: 5.6

Market Capitalization/Annualized Fee Ratio: 135

In contrast, the on-chain activity and revenue scale of XRP are far inferior to Ethereum, yet its market capitalization is close to 40% of that, further intensifying the controversy of "overvaluation."

Technical Analysis: Bearish Divergence May Trigger a 25% Retracement

(Source: Glassnode)

Recently, the price of XRP has risen, but the RSI indicator has continued to decline, forming a bearish divergence, indicating weakening buying momentum.

Potential support level: $2.32 (near the 20-2W EMA)

Estimated drop: more than 25% decrease from the current price

Historical reference: After a similar divergence occurred during the 2017–2018 cycle, XRP experienced a significant pullback.

Additionally, $2.32 is close to the realized price of XRP over the past six months, indicating that this price level may become a core area for long and short trading.

Market Outlook: Divergence Intensifies

Bearish faction: overvalued, insufficient on-chain activity, technical divergence → expect short-term pullback

Bullish: RWA growth, ETF potential, corporate adoption → Expectation of medium to long-term upward space, even challenging 10 USD

Conclusion

There is a huge gap between the current market capitalization of XRP and its on-chain fundamentals, and technical signals also indicate that short-term pullback risks are accumulating. For investors, the key lies in determining whether the actual applications of XRPL can quickly catch up with valuations in the coming quarters; otherwise, the current price may be difficult to sustain.