XRP quietly forming a "spring-loaded" supply, but retail investors are overlooking it

XRP is closing out 2025 with one of the most paradoxical pictures in the crypto market: institutional capital flows reaching record highs while price movements remain among the weakest.

According to data from CoinShares, XRP-related investment products attracted approximately $70.2 million in net inflows during the last trading week of December. This brings the total capital inflow into XRP for the month to over $424 million, making XRP the best-performing crypto investment product in terms of cash flow for the month.

In stark contrast, Bitcoin investment products saw $25 million in outflows, while Ethereum funds lost as much as $241 million during the same period.

Weekly digital asset trading capital flows (Source: CoinShares)

Price movements defy cash flow trends

However, the spot market tells a very different story. According to data from CoinPhoton, XRP traded around $1.87 at the time of recording, down about 15% for the month, ranking at the bottom of the top 10 largest crypto assets in performance.

The divergence between strong demand for managed investment products and weakening spot prices indicates a silent transition: from retail investors following momentum to institutional allocators based on models and processes.

ETF capital flows and market structure shifts

This divergence has been forming since Q4 but accelerated notably during the shortened trading weeks around year-end. Since mid-October, when XRP spot products listed in the US began trading, total net inflows into this group have exceeded $1 billion.

This steady demand sharply contrasts with the volatile and irregular capital flows in long-established crypto ETPs, where profit-taking and year-end risk reduction are common. While Bitcoin ETF investors rotate capital to optimize taxes, buyers of XRP products seem to be pursuing a completely different strategy.

The Canary XRP ETF (XRPC) has emerged as a key indicator of this new trend. Since its launch, the fund has attracted over $300 million in assets and set a record for daily trading volume among US ETFs in 2025.

This scale is significant, as it provides asset managers and model portfolios with a liquidity tool that aligns perfectly with standard brokerage and custody infrastructure. This is a prerequisite for any asset to be included in client portfolios.

Such mechanical capital flows usually do not stem from efforts to “buy the dip” or market timing, but from systematic processes. Once a product is listed, has operational history, and an acceptable bid-ask spread, capital allocation is typically fixed within portfolio models and rebalancing rules.

This explains why XRP ETPs continue to attract capital even as token prices weaken and market sentiment turns negative. When retail investors and leveraged traders sell out due to year-end fatigue, the remaining buyers are mainly filling strategic limits.

Ripple’s infrastructure bets

Meanwhile, some investors are linking renewed interest in XRP to Ripple’s long-term strategy. In 2025, Ripple intensified its penetration into traditional financial infrastructure, announcing major acquisitions such as prime broker Hidden Road and treasury management firm GTreasury, along with deploying the RLUSD stablecoin pegged to USD.

When fully integrated, these pieces will create an ecosystem spanning payments, custody, prime brokerage, and enterprise treasury management software. Hidden Road handles transaction volumes up to trillions of USD annually for hundreds of institutional clients, while GTreasury serves over 1,000 companies worldwide.

According to the “full stack” thesis, Ripple is transforming from a payments company into a vertically integrated digital asset infrastructure provider for banks and hedge funds. In this view, inflows into XRP ETPs are not just speculative bets but a managed approach to a network expected to underpin the next generation of liquidity management and collateral assets.

Market psychology and supply factors

The most apparent impact of ETF capital flows is on “float,” i.e., the amount of XRP available for trading on the market. When ETFs issue additional shares to meet demand, issuers must buy XRP and transfer it into custody. While these tokens remain in circulation during the period of issuance, the underlying tokens are effectively out of the order book.

Although this supply can re-enter the market during buybacks, in the short term, the tradable XRP supply shrinks. On-chain and exchange data show that XRP holdings on centralized exchanges are gradually decreasing toward year-end, even as fund holdings increase.

This creates a “spring-loaded” market structure. If active trading volume increases again in January or a macro shock improves risk appetite, new buyers may face significantly thinner liquidity layers. In such a scenario, even a slight increase in demand could lead to more volatile price swings than earlier in the year.

Conversely, market sentiment toward XRP on public forums has deteriorated sharply, approaching levels typically seen in bear markets. Data from Santiment shows negative comments far outnumber positive ones in recent weeks, reflecting retail investor disappointment over XRP’s underperformance compared to newer tokens and its higher volatility.

Market psychology of XRP (Source: Santiment) In previous cycles, extreme sentiment sometimes preceded counter-movements, though this relationship is not guaranteed.

Overall, XRP is in a transitional state rather than reaching consensus. The cash flow signals are building: new capital, new products, and an increasing share of supply held by rebalancing funds rather than emotions. Meanwhile, the price chart remains damaged, and social sentiment is full of skepticism.

Looking ahead to 2026, the widening gap between how XRP is traded and where the capital is residing may become more important than any short-term volatility.