Monero’s long-term prospects may be secure, but what about its short-term prospects?

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This year has been a roller coaster ride for Monero [XMR], the market’s leading privacy coin. The cryptocurrency surged over the first few months of the year, reaching a three-year high in May before beginning its decline.

At the time of writing, XMR’s situation was quite similar to that of other altcoins fighting to protect themselves from larger market declines. With Bitcoin being in the rangebound zone, it appears that alts, particularly XMR, will have to wait a bit longer before the next rise begins.

The price of the 27th largest cryptocurrency has dropped by over 11% in the previous seven days. Notably, the price reduction was strongly supported by a drop in real volume as well. On May 7, for example, XMR’s actual volume surpassed $800 million. However, at the time of publication, the same indicated a value of just $17.83 million.

The chart provided below clearly shows such a precipitous decrease. Notably, such low levels were last seen in August of last year.

Looking at the aforementioned dramatic drop, what actually triggered Monero’s downfall is a point to ponder over. Well, a host of factors, together, have resulted in XMR’s devastation.

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For starters, consider the Sharpe Ratio. This measure, in particular, illustrates an asset’s prospective risk-adjusted returns. The decrease in this percentage was most evident in the month of June. At the time of publication, the same had a value of -3.12.

When this ratio is negative, it typically suggests that the portfolio’s returns will be negative (since the risk-free rate is larger than the portfolio’s returns). Negative returns, arguably, do not give an incentive for investors to buy. As a result, XMR’s price will receive the necessary support only when this ratio rises over zero.

Source: Messari

Additionally, XMR’s market cap dominance has also been losing its grip. On 25 April, for instance, the alt’s market dominance stood at 0.37%, while the same, at press time, was just 0.27%. This metric’s decline has contributed to XMR’s bearish burdens.

It would be unjust to ignore Monero’s ecosystem-centric advancements at this point. In one repository, 9 commits (individual changes made to a file) have been made during the month of July, and the month is not yet over. Furthermore, at the time of writing, the community-led “Moneroexamples” had over 57 projects on GitHub, while the Monero Ecosystem had over 34.

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Even though the community has been working on various developments simultaneously, Farcaster, a Bitcoin-Monero atomic swap project remains the most popular one. What’s more, COMIT Network has already launched Monero-Bitcoin atomic swaps on the mainnet. Additionally, Santiment’s data pointed out that the number of developers actively contributing to the XMR’s ecosystem has been rising too.

Considering the number of projects linked to the network, the rising adoption rate, and long-term projections, it appears that the current shaky phase will end up negating itself in the long run. However, the cryptocurrency does not appear to have bright prospects in the immediate future.

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