XRP ETFs Flash Major Warning Signal

What to Know:

• XRP ETFs have seen unprecedented inflows, marking a shift in buyer behavior.
• Derivatives markets show sell-side aggression, contrasting with ETF demand.
• XRP’s price stability suggests a balance between passive inflows and active outflows.

The crypto market has seen an unusual trend this month with XRP exchange-traded funds (ETFs) experiencing consistent inflows. These XRP ETFs have absorbed roughly $954 million over 18 consecutive trading sessions since launch, without a single outflow, signaling a new type of investor in the XRP space. This trend highlights the emergence of a buyer base distinct from the typical traders governing XRP’s liquidity cycles.

Ripple CEO Brad Garlinghouse describes this new investor group as “off-chain crypto holders,” indicating those who seek volatility exposure without the complexities of exchanges or self-custody. These investors purchase XRP similarly to how they invest in the S&P 500, utilizing regulated wrappers, custodial intermediaries, and tax-advantaged accounts. This shift reflects the increasing accessibility of digital assets within traditional brokerage platforms.

Despite the significant inflows into XRP ETFs, the asset’s price remains range-bound, suggesting that ETF demand is being offset by sellers elsewhere. Binance perpetual futures data indicates persistent sell-side aggression, with the Taker Sell Ratio at its highest level since mid-November. This divergence highlights a tension between passive ETF inflows and active selling pressure in the derivatives market.

Glassnode data reveals a substantial decrease in futures open interest, falling from 1.7 billion XRP in early October to approximately 0.7 billion XRP, a 59% reduction. Additionally, funding rates have compressed, signaling a cooling speculative appetite for XRP. This suggests that the ETF bid is acting more as a buffer, absorbing supply that might otherwise drive the price lower, rather than acting as a catalyst for price appreciation.

While ETF activity occurs off-chain, the XRP Ledger (XRPL) is also undergoing its own adjustments. Although network velocity has increased, transaction fees have significantly decreased, indicating efficient repositioning of assets rather than high-value settlements. This reflects a widening gap between financial demand, driven by ETFs, and operational demand on-chain, with price discovery increasingly anchored in regulated markets.

The emergence of a dual-track market, with passive allocators and crypto-native traders moving in opposite directions, presents a unique dynamic for XRP. For now, strong ETF inflows are countering speculative interest, but the sustainability of this balance remains uncertain. The situation with XRP offers a valuable case study of the interplay between traditional investment and crypto-native trading behaviors.

Related: Top Manager Sees XRP as Undervalued Opportunity

Source: Original article