XRP goes into ETF mode: Less on exchanges, altering market dynamics

XRP balances on major cryptocurrency exchanges have declined sharply in recent weeks, a shift analysts attribute to the growing influence of newly launched spot exchange-traded funds (ETFs) rather than traditional accumulation by long-term holders.

Analyst Vincent Van Code reported that substantial amounts of XRP have moved from exchanges including Binance, Upbit, and Kraken into ETF custodial wallets. This transfer has reduced liquidity on retail trading platforms, according to Van Code’s analysis.

ETF Inflows Shift XRP Off Exchanges

The reduced exchange liquidity has altered market dynamics, Van Code stated.

When daily trading volume on retail platforms was higher, large orders were required to generate notable price movements. With contracted volume, moderate-sized trades now produce sharper intraday price swings.

The market environment remains fundamentally supported by ETF buying activity while becoming more sensitive to smaller transactions, Van Code noted. High-frequency trading firms are preventing price dislocations through arbitrage mechanisms similar to those deployed for Bitcoin and Ethereum ETFs, he added.

These automated trading systems correct price gaps when ETF values drift from underlying asset prices, maintaining alignment between both markets, according to Van Code. The mechanism ensures XRP purchases occur during ETF creation events and provides structural stability, though retail trading charts may display more frequent volatility.

Van Code stated the long-term outlook for XRP has strengthened due to this structural shift, despite potentially increased short-term volatility for traders. The analyst noted that modest sell orders or resistance levels can now generate significant hourly price movements under current conditions with reduced on-exchange volume.

Arbitrage activity provides stabilization, Van Code said, adding that XRP remains positioned to reach new price highs. However, traders should anticipate periods of heightened volatility as the market adjusts to reduced spot volume on exchanges, the analyst cautioned.