XRP Market Supply Plummets Amid Expanding Institutional Demand

XRP continues to face intense supply pressure as exchange reserves shrink. In contrast, institutional demand continues to rise as seen with United States spot ETFs. Meanwhile, Glassnode data revealed that when XRP failed to surpass the $2 mark, it caused significant realized losses.

XRP Reserves Hit Lows as Institutional Accumulation Intensifies

Fresh data from CryptoQuant shows a rapid fall in Binance’s XRP reserves. It is now at its lowest point in months and signals one of the strongest accumulation phases seen this year.

The token’s reserves on the exchange is now less than in early October after it dropped to approximately 2.7 billion tokens this week. This marks one of the great accumulation periods this year.

This slump indicates increased exits of trading platforms with long-term investors and institutions buying more XRP tokens. This may create a change in the token’s price behavior. XRP price is currently $2.18, down almost 2% in the last day, per TradingView data.

A contributor to CryptoQuant, Darkfost, indicated that continuous drops in reserves are a good indicator of increasing long-term investor interest. He remarked that it is likely that XRP price behavior is going through a new phase. Darkfost’s view aligns with broader discussions within the XRP community about native XRP staking.

This idea and other long-term holding incentives were recently explained by a Ripple developer. According to him, this will be determined by institutional investors and not retail.

Data from Glassnode gives an extra context to the discussion about XRP supply on exchanges. The analytics company stated that when XRP dropped to around $2 this month, the daily losses realized soared to almost $75 million. The company added that this price point serves as a strong driver of selling behavior for the token.

Increased XRP ETF Inflows Contributes To Shortage Of Supply

The current market trend is a repetition of past cycles of accumulation which happens to major assets when they become a regulated investment vehicle. Meanwhile, the decrease in exchange supply corresponds to substantial inflows into spot XRP ETFs.

SoSoValue data showed that more than $21 million was deposited in these funds on Wednesday. Franklin Templeton, Canary, Bitwise and Grayscale registered positive inflows.

Bitwise was the top performer of the day, with more than $7.4 million inflows. Franklin Templeton received almost $4.8 million, and Canary got over $5.2 million.

These inflows reflect high demand for this token among wealth managers, advisory companies and institutions who want regulated exposure. Recently, XRP price reacted positively to ETF inflows after the spot ETFs attracted more than $164 million.

A contracting supply pool can positively affect prices. Less pressure on the sell side may lead to additional price gains if demand continues to increase.

Analyst Warns ETF Demand Could Surpass Supply

One concern has emerged after a demand estimate by strategist Chad Steingraber, who simulated the effect of a $1 billion ETF inflow day for all XRP funds.

His scenario pegged the estimate of ETF issuers at more than 229 million XRP at the present prices in one day. His estimate grew to an excess of 27.5 billion XRP over six months. This 6-month supply is more than the total liquid supply available across all platforms.

Hence, Steingraber warned that heavy ETF buying without a price increase could make XRP too scarce for retail traders. He added that XRP must rise with demand to prevent severe market shortages. He predicted that this could happen within a year when there’s aggressive inflows.