Why XRP Declined Despite Strong ETF Inflows? Key Reason Explained

Overview:

• Strong ETF Inflows into XRP ETFs have not lifted the price due to hedging, profit-taking, and market mechanics.

• XRP faces heavy resistance near $2.00 as broader crypto market sentiment remains cautious.

• ETFs signal long-term institutional demand, even as short-term volatility pressures XRP.

XRP has been under price pressure even with strong institutional demand through spot XRP exchange-traded funds. In mid-December 2025, XRP traded close to the $2.00 level, struggling to sustain upward momentum despite cumulative ETF inflows approaching $1 billion and total ETF assets reaching the low billions. This disconnect between growing institutional participation and falling or sideways price action has raised important questions across the crypto market.

Below are some reasons why ETF inflows alone are not enough to lift XRP’s price in the short term.

ETF Inflows Do Not Immediately Push Prices Higher

ETF inflows are usually seen as a bullish signal, but they do not necessarily lead to higher spot prices. When investors buy XRP ETFs, fund managers don’t always purchase tokens directly from public exchanges. Much of the XRP can be sourced through private transactions or liquidity providers, which limits direct buying pressure on open markets.

Additionally, ETF creation and redemption processes involve authorized participants who frequently hedge their exposure. This may include selling XRP in spot markets or using derivatives such as futures and perpetual contracts. As a result, ETF demand can be partially offset by hedging activity, causing price movements to lag inflows even when institutional interest is strong.

Profit-Taking and Broader Market Weakness

XRP’s recent decline has also been influenced by wider market behavior. After a strong rally earlier in the year, many traders chose to lock in profits, especially after renewed volatility in Bitcoin and technology stocks. Crypto assets often move together during periods of uncertainty, and XRP is no exception.

Following a mixed Federal Reserve policy update and uneven equity market performance, risk appetite weakened across asset classes. During such phases, investors first reduce their exposure to altcoins. Even with positive developments specific to XRP, broader market caution has lowered buying momentum and increased short-term selling pressure.

Also Read - Why the XRP Boom Hasn’t Happened Yet: Analyst Explains

Strong Resistance Near the $2.00 Level

Technical factors play a major role in XRP’s current price action. The $2.00 price level has been a strong psychological and technical resistance zone. Each time XRP approaches it, selling activity increases as traders take profits or open short positions.

High trading volumes near resistance indicate that large holders are distributing tokens rather than accumulating. This behavior weakens upward momentum and discourages new buyers. When resistance holds for multiple sessions, short-term traders often shift to bearish strategies, reinforcing downward pressure even amid positive fundamental news.

Exchange Liquidity and Volatility Effects

ETF inflows have gradually reduced the amount of XRP available on public exchanges. While shrinking exchange balances are generally bullish over the long term, they can also increase short-term volatility. Thinner order books suggest that even moderate sell orders can move prices more sharply than usual.

At the same time, ETF inflows have not been perfectly consistent. Short pauses or brief periods of reduced inflows allow sellers to regain control. In early December 2025, data showed intermittent slowing in ETF demand, coinciding with reduced trading volumes and increased price sensitivity on exchanges.

Market-Maker Hedging and Derivatives Pressure

Market makers play an important role in ETF operations, and their risk management strategies can influence spot prices. To stay neutral, market makers often hedge ETF exposure through futures, swaps, or spot sales. These hedging trades can create temporary selling pressure, especially during heavy ETF buying.

This dynamic explains how XRP can see rising institutional ownership through ETFs while still facing downward price movement in public markets. Hedging activity does not show negative sentiment but can suppress price action until market conditions stabilize.

Regulatory Progress Brings Short-Term Uncertainty

Regulatory developments in 2025 have significantly changed XRP’s long-term outlook. The long-running legal dispute between the SEC and Ripple reached formal closure, with appeals dismissed and enforcement actions concluded. This removed the uncertainty that weighed on XRP for years.

However, markets usually react in stages to regulatory clarity. After the initial optimism fades, investors reassess how new rules and approvals will work in practice. Additional headlines, such as conditional approvals for crypto-related national trust bank charters, have strengthened XRP’s long-term use case. However, it has also prompted short-term repositioning as investors evaluate real-world implementation timelines.

Also Read - XRP Price Prediction: Will It Hit $10? Expert Weighs In

Large Holder Behavior and Supply Dynamics

XRP ownership is concentrated among exchanges, early investors, and corporate entities. When these large holders rebalance their portfolios or take profits, their actions can outweigh ETF inflows in the short term. Even limited selling from major holders can have a significant impact, especially when liquidity is low.

Algorithmic trading systems also respond quickly to changes in momentum and flow data. If price action weakens near resistance levels, these systems may increase selling or reduce bids, adding further pressure despite strong long-term accumulation trends.

Long-Term Adoption vs Short-Term Price Movement

ETF inflows represent a shift toward institutional and longer-term ownership, which is structurally positive for XRP. However, price is driven by immediate supply and demand, not long-term narratives alone. Liquidity conditions, trader positioning, technical resistance, macroeconomic sentiment, and hedging behavior all influence short-term price direction.

Strong ETF demand is building a foundation for future appreciation, but it does not prevent temporary declines or consolidation phases. Markets often need time to absorb structural changes before prices fully reflect them.

Final Thoughts 

XRP’s decline despite nearly $1 billion in ETF inflows shows complex market mechanics rather than a failure of demand. ETF structures, hedging activity, profit-taking, technical resistance near $2.00, macroeconomic caution, and regulatory digestion have all contributed to recent weakness.

As of mid-December 2025, XRP trades around $2.00, while ETF assets remain in the low billions. This divergence suggests accumulation is happening beneath the surface, even as short-term price action is under pressure. Continued monitoring of ETF flows, exchange liquidity, derivatives positioning, and broader market trends will determine whether the current phase becomes a launching point for recovery or an extended period of consolidation.

FAQs

1. Why is XRP falling despite strong ETF inflows?

XRP is under pressure due to profit-taking, market-maker hedging, strong resistance near $2.00, and broader crypto-market weakness.

2. How much money has flowed into XRP ETFs so far?

Cumulative XRP ETF inflows are approaching $1 billion, with total ETF assets now in the low billions.

3. Do XRP ETFs buy tokens directly from exchanges?

Not always. ETF managers often source XRP through private liquidity providers, which limits immediate buying pressure on public exchanges.

4. Is the $2.00 price level important for XRP?

Yes. The $2.00 level has served as strong psychological and technical resistance, triggering repeated selling.

5. Are XRP ETFs still bullish for the long term?

Yes. XRP ETFs indicate growing institutional adoption, which supports long-term growth despite short-term price volatility.