XRP Liquidity Signals Supply Concerns

What to Know:

• XRP reserves on Binance have decreased by 45% over the past year, indicating a shift towards longer-term storage among holders.
• On-chain data patterns resemble those of early 2022, a period that preceded a significant price decline for XRP.
• Decreasing XRP supply on exchanges could signal a potential decrease in immediate selling pressure, which may positively influence XRP liquidity.

XRP is currently navigating a complex market environment, marked by substantial shifts in exchange reserves and on-chain dynamics. A significant reduction in XRP held on Binance suggests a transition towards longer-term holding strategies. However, on-chain data reveals patterns reminiscent of previous downturns, creating a mixed outlook for the cryptocurrency.

XRP Supply Dwindles on Binance

Binance’s XRP reserves have experienced a sharp decline, dropping nearly 45% in the last year. This decrease, from $10.16 billion to $5.55 billion, suggests a considerable movement of XRP from the exchange to private wallets. This trend typically indicates that fewer holders are inclined to sell in the short term, potentially reducing immediate selling pressure.

On-Chain Data Echoes Past Downturns

Analysis of on-chain data from Glassnode reveals similarities between the current market structure and that of early 2022. During that period, XRP experienced a notable price decline. The present structure shows newer investors acquiring XRP at prices lower than those held by long-term holders, creating psychological pressure that could lead to potential sell-offs if prices fail to recover.

The $2 price level has historically triggered significant realized losses since mid-2025, with repeated tests of this level coinciding with substantial weekly losses. This indicates that $2 is a key level where many traders opt to reduce their positions.

Price Weakness Accompanied by Declining Volume

After reaching a multi-month high earlier in January, XRP has retraced, losing the $2 support level. This price weakness has been observed alongside declining trading volumes, mirroring patterns seen in 2021-2022. A decrease in trading volume during a downtrend can indicate waning interest from buyers, potentially exacerbating the downward momentum.

Recent data also indicates significant outflows from U.S.-based XRP ETFs, reflecting a pullback in investor activity amid broader global economic uncertainties.

Compression Phase Suggests Potential for Future Movement

Analysis of the XRP/BTC chart reveals a compression phase characterized by tight moving averages. This pattern often precedes a significant price movement once a clear direction is established. Currently, XRP is oscillating between support and resistance levels, potentially indicating accumulation after a period of decline.

Conclusion

XRP’s market dynamics present a mixed picture. While the reduction in exchange reserves could alleviate selling pressure, the concerning similarities to past downturns and declining trading volumes warrant caution. The compression phase observed in the XRP/BTC chart suggests that a significant move is on the horizon, but the direction remains uncertain. Monitoring these technical and on-chain indicators will be crucial for gauging XRP’s future trajectory.

Related: Bitcoin Liquidation: $1.5B Signals Market Turn

Source: Original article