XRP Supply Shock Debate Intensifies as ETF Inflows Drain Exchange Liquidity

There is an increasing controversy within the XRP community with the information indicating that exchange reserves decreased considerably. Over 180 million XRP have been moved off big exchange platforms over the past few weeks and speculation is that exchange liquidity is shrinking at a faster pace than expected. The decline is timed when institutional demand via new XRP ETFs is still climbing, and speculation is being made regarding whether the market will soon be in a state of supply shock. However, analysts in the marketplace warn that the withdrawal of supply will not be adequate to cause structural squeeze unless there are sustained and regular inflows.

ETF Requirement

Spot funds by Canary Capital are among the XRP ETFs that began trading in mid-November and have already taken in over eight hundred million dollars in inflows in their first weeks. This influx has been accompanied by almost three hundred million XRP being withdrawn out of Binance reserves since late October per the liquidity data of CoinMarketCap. The timing has enhanced the story that the ETF-driven demand is driving tokens out of circulation. The price of XRP has been near the two-dollar-twenty-cent range throughout the accumulation stage, which suggests that institutional institutions are perhaps scooping supply up over the OTC and dark pools as opposed to furiously transacting on the order book.

Supply Shock Narrative

Analysts of X note an increasing opinion that ETF flows will ultimately flood the unseen liquidity provisions. Bitcoin are not the same since the Ripple is scheduled to release escrows and its distribution patterns are both broader. Nevertheless, the depreciating exchange balances is an indication of a tighter environment that would worsen in case of inflows. Liquidity scholars caution that the retail platforms tend to mirror shock situations when OTC reserves are not large enough to absorb demand.

Scholarly Research Indicates Lagging Effect

The Journal of Financial Economics peer-reviewed literature helps one to put the role of OTC markets in alleviating early pressure in institutional accumulation. The study indicates that in most crypto assets, high buying participants make use of latent liquidity over several weeks or months prior to their presence in the imbalances of the spot markets becoming apparent. This model will be able to serve the thesis that the exchange withdrawal trend of XRP is the initial phase of a multi-step tightening process.

Fate of the Market

The future of XRP mostly depends on the stability of the ETF demand. Traders are currently tracking the balance of exchange rates, OTC desk, and ETF flow rate to either reveal whether XRP is undergoing a supply-constrained period or merely, a temporary imbalance. The discussion highlights the role of institutional involvement in changing the liquidity trends of the larger digital asset landscape.