XRP has kicked off 2026 with significant momentum, breaking through a key technical barrier. However, analysts point to a more powerful fundamental driver behind the recent price surge: a pronounced supply shock. A sharp decline in exchange reserves, coupled with steady demand from exchange-traded funds (ETFs), is creating a tightening market dynamic that could set the tone for Q1.
Exchange Reserves Hit Multi-Year Low
A primary factor underpinning the asset’s strength is a dramatic contraction in available supply. Holdings of XRP on centralized trading platforms have plummeted to their lowest level in years. Throughout 2025 alone, these exchange reserves dropped from approximately 3.95 billion tokens to around 2.6 billion—a reduction of 45%.
This movement of tokens into private wallets, known as self-custody, directly reduces the immediate liquidity available for sale. In an environment of such supply tightness, even moderate increases in buying pressure can lead to disproportionately large price gains.
Technical Breakout Gains Momentum
From a chart perspective, XRP confirmed a major bullish signal this week. On Monday, it decisively broke through the stubborn resistance level at $2.12. The asset has since advanced further, currently trading near $2.26.
Market observers highlight that the breakout is accompanied by robust trading volume, which spiked to nearly 50% above the weekly average. This indicates the move is supported by broad buying interest and is not occurring in an illiquid market. Furthermore, previous areas of resistance are now acting as support, with the price stabilizing at higher levels instead of being immediately sold off.
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Steady Institutional Inflows Provide Support
As the freely traded supply diminishes, institutional demand continues to grow. U.S.-listed spot ETFs for XRP have recorded consistent inflows, even during periods of sideways price action. A notable divergence occurred in December: while Bitcoin and Ethereum ETF products experienced significant outflows, XRP-focused funds attracted nearly half a billion dollars in new capital.
Analysts calculate that every billion dollars of ETF inflows effectively removes roughly 500 million XRP from circulating supply. This establishes a long-term scarcity dynamic that provides a fundamental floor for the price.
Fundamentals and Network Activity Strengthen
Beyond capital flows, improvements in the network’s underlying utility are coming into focus. Daily transaction counts are approaching the one million mark, signaling growing use. Concurrent regulatory progress in the United States is also enhancing the fundamental outlook for the asset.
The current landscape for XRP combines technical strength with a structural supply squeeze. Provided ETF inflows remain steady and the $2.15 level holds as a new support zone, the positive trend appears well-positioned to continue through the first quarter.
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