Ripple (XRP) with 990 million locked units, will it counterattack after a $500 million loss?

▲ XRP (XRP) ETF/ChatGPT generated image ©

While cumulative funds of $1.51 billion have flowed into the US spot XRP (Ripple) ETF product group, locking up 992.4 million units, investor capital amounting to approximately $520 million has been lost due to a decline in token price, and the penetration rate relative to market capitalization remains stagnant at 1.49%.

According to TradingNews, an investment media outlet, on August 6 (local time), the seven US-listed spot XRP ETFs recorded a net outflow of $3.58 million on Wednesday, ending a four-day streak of net inflows, reducing their total net assets to $993.4 million. On Wednesday alone, $244.42 million flowed into Bitcoin spot ETFs and $60.9 million into Ethereum spot ETFs, energizing the overall cryptocurrency fund market, while XRP saw a decline, trading around the $1.04 mark. This indicates that investor funds are not spreading across assets but rather remaining as short-term supply and demand fluctuations due to regular portfolio rebalancing by some advisory platforms.

The most striking point is the discrepancy between the cumulative net inflow of $1.51 billion and the current net asset balance of $993.4 million. Despite an additional $329 million in new funds flowing in this year alone, XRP's price has fallen by 41.51% this year and plummeted by 70.55% from its peak, resulting in a depreciation of approximately $520 million in shareholder capital. This contrasts with the Bitcoin spot ETF market structure, where net asset value is significantly higher than cumulative inflows, indicating that a large number of investors are making profits.

Nevertheless, the phenomenon of funds locking up volume through ETFs is acting as a driving force supporting the market's bottom. The 992.4 million XRP currently held by the seven funds account for approximately 0.99% of the total circulating supply, and nearly 62% of the 1.6 billion units remaining on centralized exchanges. In the past 10 weeks, an additional 192 million units have been absorbed into fund custody accounts, causing exchange liquidity to fall to a seven-year low, which serves as a price floor, defending against a cascade of sell-offs in the market.

In terms of market penetration, both growth potential and limitations are simultaneously revealed. The net asset value of XRP spot ETFs is only 1.49% of the total XRP market capitalization of approximately $63 billion, significantly lower than Bitcoin (6.08%) or Ethereum (4.7%). In May, monthly inflows soared to $131.94 million due to expectations of the cryptocurrency market structure bill passing the Senate, but as the bill's processing schedule was postponed, July's inflows plummeted by 79% to $27.29 million, demonstrating a strong correlation with congressional legislative actions.

The future direction of the fund ecosystem depends on the resumption of Senate legislative discussions and the recovery of monthly fund inflows. Experts predict that if monthly inflows remain around $25 million, their market impact will be limited, but if they recover to over $75 million or even $100 million, as in May, they will form a clear upward momentum relative to market capitalization. Currently, on technical charts, a volatility condensation process continues between the Fibonacci extension support level of $1.01 and the resistance level of $1.22.

*Disclaimer: This article is for investment reference only, and we are not responsible for investment losses based on it. The content should be interpreted for informational purposes only.*