XRP’s Supply Squeeze Grows Despite $1 Billion Escrow Release – Here’s Why!

XRP

The year 2025 has been primarily perceived as bearish for cryptocurrencies; however, a deeper exploration reveals some underlying strengths, particularly for Ripple's XRP. Despite recent market fluctuations and the usual $1 billion escrow release, XRP shows signs of resilience. Investors should consider the implications of this supply unlock and its potential effects on market positioning.

Key Takeaways

2025 has been challenging yet revealing for XRP.
A significant drop in Q4 erased H1 gains, resulting in XRP closing down 12% for the year.
The routine $1 billion escrow release could influence market dynamics.
Current data indicates a strong long bias from traders, suggesting optimism for a price increase.
A reduction in XRP’s exchange reserves hints at a looming supply squeeze.

Understanding XRP's Current Market Dynamics

As we take a broader view, 2025 has largely been seen as a year of market pessimism for cryptocurrencies. However, when we analyze the details, a different picture emerges. Although the fourth quarter saw negative sentiment (FUD), the first half of 2025 was quite positive with solid growth. It seems that it only took one significant event in the second half to trigger a profit-taking phase, pushing many leading cryptocurrencies below crucial support levels.

Ripple's XRP serves as a prime example of this trend. The cryptocurrency experienced a steep 36% decline in the fourth quarter that canceled out all of its gains from the first half of the year, resulting in XRP finishing 2025 down by 12%. As we approach 2026, the standard $1 billion escrow release is not necessarily beneficial amid this situation.

XRP Source: TradingView (XRP/USDT)

In this context, monitoring derivatives is crucial for investors. As per data from CoinGlass, the perpetual XRP/USDT contract displayed a long bias exceeding 70% at the time of writing, indicating that bullish traders are betting on a price increase. Considering XRP's recent movement around $1.85, this bullish sentiment seems justified.

The escrow release plays a significant role in this scenario, as typically, around 20% of the unlocked assets enter the market. With more traders leaning long, a key consideration is whether they are anticipating a short-term bottom or preparing for another price drop.

Assessing the Impact of Supply Unlock on XRP

Despite the overall negative sentiment, 2025 has positioned itself as a pivotal year for XRP. The regulatory clarity provided by the SEC has offered Ripple a favorable environment to operate. This context, combined with the anticipated CLARITY Act, could further bolster XRP’s infrastructure and encourage widespread adoption.

This positive shift is evident in on-chain activity. CryptoQuant’s data highlights a decline in XRP's exchange reserves from 3 billion at the beginning of 2025 to 2.6 billion, with around $300 million worth of XRP leaving exchanges just in the fourth quarter.

Ripple
Source: CryptoQuant

The bottom line is that XRP's market fundamentals appear robust. Technically, the four weeks of sideways movement around $1.80, along with decreasing exchange reserves, suggest a supply squeeze is developing, even with the $1 billion escrow release entering circulation. In this light, a long position seems sensible for traders.

Conclusion

In summary, while 2025 has had its challenges, especially in the latter half, XRP shows potential for recovery and growth. Investors should consider market dynamics, such as the influence of the escrow release and current trading sentiments, as they look ahead into 2026.