This week, XRP is demonstrating a classic market phenomenon: how swiftly positive developments can be overshadowed by a broader shift toward risk reduction. Despite the activation of a significant protocol upgrade, Thursday’s trading was dominated by a severe wave of selling. The key question is why this fundamental progress failed to provide immediate price support.

Liquidation Cascade Drives Decline

Market analysis points to the derivatives sector as the primary catalyst for the downturn. As XRP breached key technical chart levels, a cascade of liquidations for leveraged long positions was triggered. Data from Coinglass reveals that XRP liquidations totaled approximately $46 million over a 24-hour period, with the majority stemming from bullish bets.

This sell-off pushed the price below a zone previously considered an area of demand. Technical observers note that this former support level may now act as resistance. Further signs of caution emerged in options activity on the Deribit exchange, where positioning turned more defensive. Interest increased in strategies designed to profit from either declining prices or rising volatility.

Adding to trader anxiety is the chart structure itself. Historically, there has been relatively little trading activity between the current price zone and the psychologically significant $1.00 level. This “air pocket,” as traders call it, can often accelerate price movements in either direction.

ETF Outflows Signal Shifting Sentiment

Compounding the pressure, U.S. spot XRP ETFs experienced notable outflows in January 2026. According to FXStreet, this included a single-day withdrawal of $93 million on January 30. Consequently, cumulative inflows receded toward $1.17 billion, down from a peak near $1.37 billion in mid-January.

These flows suggest waning demand through the ETF channel, indicating reduced structural support from institutional capital. The price action reflects this: XRP currently trades at $1.37, marking a 52-week low. Its 14-day Relative Strength Index (RSI) sits at 28.8, deep in oversold territory.

Should investors sell immediately? Or is it worth buying XRP?

Protocol Progress: A Long-Term Play

Amidst this turbulent market phase, a major protocol-level advancement went live. On February 4, the “Permissioned Domains” feature was activated on the XRP Ledger, supported by over 91% of validators.

The core of this upgrade (XLS-80) enables the creation of restricted access areas within the public XRPL. Participation in these domains is limited to accounts holding specific verified credentials. The objective is to provide regulated institutions with a compliant environment without requiring them to operate separate, isolated private blockchains. Domain operators set the rules, and qualified accounts are automatically enrolled as members.

This represents a clear step toward greater institutional utility. However, such infrastructure improvements typically do not produce immediate price impacts. Their true value will be determined by subsequent real-world implementation and measurable on-chain activity.

Positive Developments Fail to Halt Slide

Several other favorable announcements coincided with the upgrade but did little to stem the selling pressure:

• Ripple Prime Integration: Hyperliquid was integrated into Ripple’s institutional prime brokerage platform, offering clients access to on-chain perpetual liquidity, including cross-margining.
• European Regulatory Expansion: Ripple secured E-Money Licenses in Luxembourg, broadening its regulated operational base in Europe.
• Institutional DeFi Access: Flare and Hex Trust announced institutional access for FXRP minting and FLR staking services.

The overall picture reveals a distinct short-term disconnect. While fundamental developments are accumulating, the current price is being driven more forcefully by market positioning, momentum, and the broader risk-off environment.

The immediate focus is on whether XRP can reclaim the area around its former support near $1.44. Failure to do so may see the weakness persist, even as the network upgrade begins the longer-term task of proving it can attract tangible institutional adoption.

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