ETFs keep buying... Why did XRP (Ripple) fall to $1?

▲ Ripple (XRP) ©Go Dasol

Even XRP spot ETFs, which have maintained monthly net inflows, could not stop the supply flood. XRP (Ripple) fell to $1.03, leaving its 52-week low just 2% away, and the escrow volume released into the market each month amounted to up to 15 times the ETF demand.

According to the investment news outlet TradingNews on August 7 (local time), XRP traded at around $1.03 at 10:30 AM on that day, down approximately 1.7% during the trading session. The price is 2% higher than its 52-week low of $1.0095, but 69.5% lower than its high of $3.3818. While Bitcoin (BTC) surpassed $65,000 and Ethereum (ETH) rose to $1,929.36 amidst a decline of 23,000 non-farm payrolls in the US in July and a drop in the probability of a September interest rate hike to 44%, XRP showed the weakest performance among major cryptocurrencies.

XRP's market capitalization is approximately $64.4 billion, based on a circulating supply of 62.53 billion units. The price rose from $1.85 at the beginning of this year to $2.41 in January, but has since fallen by 57.3%, and the decline over the past year has exceeded 68%. Technically, it is below both the 50-day moving average of $1.11 and the 200-day moving average of $1.36, indicating a continued downtrend. $1.00 is the last support line that has been held throughout this year, and if it breaks, the next support zone is $0.90. Conversely, to reverse the trend, it needs to recover $1.11 with accompanying trading volume and then break through $1.20-$1.25.

As of August 5, the seven XRP spot ETFs traded in the US held 992.4 million XRP and approximately $1 billion in assets, with cumulative net inflows of $1.49 billion since their launch. Although there have been no monthly net outflows, the pace of fund inflows plummeted by 79% in two months, from $131.94 million in May to $59.46 million in June and $27.29 million in July. The assets held by ETFs also represent only about 1.6% of the market capitalization, suggesting that the demand base is too small to drive up the price.

The biggest burden is the escrow volume. Ripple supplies 200 million to 400 million XRP to the circulating market each month on a net basis, which translates to a monthly value of $206 million to $412 million at current prices. This is 7.5 to 15 times the inflows into XRP spot ETFs in July. If the same pace continues, the circulating supply could increase to 73 billion to 84 billion units by 2030, with a median of approximately 78 billion units, diluting the current supply by about 25%. Furthermore, the postponement of the US crypto market structure bill, the Clarity Act, for a Senate vote until September, and the reduced likelihood of its passage within the year to 28%, have weakened expectations for short-term supply and demand improvement.

The media suggested a 50% probability that XRP would trade between $1.00 and $1.12 before the August Consumer Price Index (CPI) announcement and the US Senate's return on September 14. The probability of a bullish scenario was 25%, predicting $1.35-$1.36, premised on inflation slowing down and the Clarity Act vote. A bearish scenario also had a 25% probability, foreseeing a drop to $0.90 if $1.00 breaks. While a 7-year low in exchange supply and the XRPL's real-world asset tokenization exceeding $474 million are positive factors, the current structure where monthly escrow supply overwhelms regulatory demand has been identified as the key variable for the price.

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