XRP Price Tumbles as ETF Demand Signals Drop

What to Know:

• XRP ETFs are experiencing significantly decreased demand after an initial surge.
• This trend coincides with a price correction in XRP, despite some positive indicators.
• The flat ETF inflows may affect XRP’s liquidity and market performance.

The initial enthusiasm for XRP ETFs appears to be waning, with recent weeks showing minimal to no net inflows. This slowdown comes after a strong debut for the first XRP ETF in November, followed by the launch of several similar products. The current lack of demand raises questions about the sustainability of interest in these investment vehicles.

Flatlining ETF Flows

Canary Capital’s XRPC ETF broke records upon its debut in November, and total inflows into XRP ETFs quickly surpassed $1 billion. However, recent data indicates a significant drop in investor interest. After experiencing net outflows in late January, the situation has worsened, with multiple days of zero reported daily flows in February. This lack of activity has resulted in cumulative net inflows stagnating at $1.23 billion.

XRP Price Correction

Amidst the ETF struggles, XRP experienced a brief price surge, reaching a multi-week high. However, this rally proved unsustainable, and the token has since corrected, falling over 10% from its peak. While it has managed to defend a key support level, the overall sentiment remains cautious, with short traders dominating the XRP landscape.

Potential Undervaluation

Despite the recent price drop, a report by Santiment suggests that XRP may be slightly undervalued based on its 30-day MVRV ratio. Additionally, a surge in realized losses could potentially trigger a significant price rebound, as has occurred in the past. This suggests a possible buying opportunity if historical patterns hold true.

Broader Market Context

The performance of XRP and its related ETFs is taking place within a broader context of evolving crypto market structure. Bitcoin ETFs continue to see inflows. Ethereum is also performing well, and the dynamic between these leading cryptocurrencies and altcoins like XRP is crucial for investors to monitor. Market participants are likely waiting to see how the regulatory landscape evolves, especially given the ongoing legal battles involving Ripple.

Implications for Liquidity

The diminished demand for XRP ETFs could have implications for the token’s liquidity. ETFs typically provide a mechanism for increased liquidity by allowing a wider range of investors to access the asset. If ETF inflows remain subdued, it may limit the overall liquidity available for XRP trading, potentially leading to increased price volatility.

In conclusion, the initial excitement surrounding XRP ETFs has faded, and the token is currently experiencing a price correction. While some indicators suggest potential undervaluation, the overall outlook remains uncertain. Investors should closely monitor ETF flows, price action, and broader market developments to make informed decisions.

Related: Bitcoin Stays at $68K: Crypto Weekend Watch

Source: Original article