Understanding the Impact of Rapid XRP Outflows from Crypto Exchanges on Price Trends

A notable decrease in XRP balances on major cryptocurrency exchanges has sparked discussions around its potential effects on the asset's price movements. Analyst Vincent Van Code brought attention to this phenomenon, clarifying that these transactions are not merely indicative of long-term holders accumulating supply. Instead, he attributes this trend to the growing influence of newly launched Spot XRP ETFs, which are now capturing a considerable portion of market activity that previously occurred on retail platforms.

Key Takeaways

A sudden decrease in XRP balances across exchanges is prompting discussions about its price impact.
The rise of Spot XRP ETFs is shifting market activity and liquidity away from retail platforms.
With lower trading volumes, smaller transactions can lead to significant price fluctuations.
High-frequency trading firms are mitigating potential price dislocations through arbitrage strategies.
The outlook for XRP remains positive, with predictions of a price target of $5, though traders may face volatility.

XRP

Liquidity Shift: ETF Demand Moving Away from Exchanges

Van Code points out that the billions of XRP transferring from platforms like Binance, Upbit, and Kraken are primarily directed into ETF custodial wallets. This change shifts how the market responds to buying and selling pressures, as retail exchanges are now operating with reduced liquidity. In the past, when daily trading volumes averaged in the multi-billion-dollar range, substantial orders were necessary to trigger noticeable price changes.

With the current trading volume dwindling, even moderately sized trades have the potential to cause significant intraday fluctuations. This situation results in a market increasingly supported by ETF purchases, yet more sensitive to smaller sell-offs or sudden buy orders.

Despite the decline in exchange liquidity, Van Code observes that high-frequency trading firms are effectively preventing price disruptions. These firms have already honed their arbitrage strategies for Bitcoin and Ethereum ETFs and now apply similar techniques for XRP. Whenever the ETF price strays from its intrinsic value, automated systems swiftly correct the discrepancy, maintaining a close alignment between both markets. This system ensures that XRP remains available during ETF creation events and adds a layer of structural stability, despite the likelihood of more frequent price spikes and dips on retail charts.

Future Price Movements: What It Means for XRP

Van Code believes that this transition ultimately strengthens XRP's long-term outlook, even as short-term trading experiences may become more turbulent. Previously, when XRP's daily spot volumes varied between $2 billion and $3 billion on exchanges, significant concentrated buying or selling—over $200 million—was required to move the price by 5% to 10% in either direction.

Now, with on-exchange volumes dropping below the $1 billion daily mark, the dynamics have shifted significantly. A sell order or resistance wall around $15 million can potentially swing XRP's price by approximately 12% to 18% within just one hour under these thinner market conditions. However, the presence of arbitrage bots serves as a silver lining.

According to the analyst, XRP is still positioned to reach a price of $5. Nevertheless, until the price adjusts to the reduced spot volume on exchanges, traders should brace for significant price fluctuations, with potential swings of up to 20% where relatively small buy or sell flows can lead to considerable shifts.

XRP XRP trading at $2.0 on the 1D chart | Source: XRPUSDT on Tradingview.com