XRP reserves across major cryptocurrency exchanges have dropped significantly in recent weeks, a shift analysts say is being driven by the rapid growth of newly launched spot XRP exchange-traded funds (ETFs) rather than traditional long-term holder accumulation.
Large transfers of XRP have been observed leaving trading platforms such as Binance, Upbit, and Kraken and moving into ETF custodial wallets, according to analyst Vincent Van Code. These ETF-driven withdrawals have tightened liquidity across retail exchanges, resulting in a market environment that reacts faster — and more sharply — to order flow.
Van Code noted that earlier, higher liquidity levels required substantial buy or sell orders to influence price. But with a reduced supply available on spot markets, even moderate transactions now trigger more pronounced intraday movements. This is making XRP’s short-term trading landscape more volatile, despite stronger underlying demand from institutional ETF flows.
While exchange liquidity has thinned, high-frequency trading firms are helping maintain price stability between ETF and spot markets. These firms use arbitrage systems similar to those developed for Bitcoin and Ethereum ETFs. When the ETF market price deviates from the spot value of XRP, automated trading corrects the imbalance, ensuring alignment between both markets.
This mechanism keeps ETF creation and redemption activity flowing smoothly, offering structural support even as the retail trading charts show sharper swings.
Van Code stated that the long-term outlook for XRP is actually improving: reduced exchange supply, combined with consistent ETF accumulation, strengthens the asset’s broader market position. However, traders should prepare for more frequent volatility. Under current liquidity conditions, even modest sell pressure or resistance levels can produce outsized hourly moves.
Despite the heightened volatility, arbitrage activity continues to anchor the market, and Van Code maintains that XRP remains well-positioned for potential new price highs. Still, he cautions that as the ecosystem adjusts to reduced spot-market volume, periods of sharp fluctuations are likely to persist.
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