LONDON (IT BOLTWISE) – Discussions surrounding XRP have increased in recent weeks as the cryptocurrency continues to trade around the $2.2 mark. Despite rising institutional demand, the market remains unusually quiet, which some experts attribute to the mechanics behind the new spot XRP ETFs.
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In recent weeks, attention on XRP has increased as the cryptocurrency trades steadily around the $2.2 mark. This comes as new spot XRP ETFs from various providers continue to see capital inflows. A member of the XRP community, known as Pumpius, has tried to explain the calm in the market despite increasing institutional demand. In a detailed thread on X, he explained the mechanics behind the new ETFs and why the real impact may be yet to come.
A key point in Pumpius’ argument is the legal restriction that ETF fund managers cannot purchase XRP directly from Ripple or from the escrow accounts that hold large reserves of the token. Each ETF must obtain XRP through open market purchases, without private deals or wholesale agreements. This regulation forces institutional buyers into the same liquidity pool as retailers and large investors.
With the launch of the new XRP ETFs and the continued increase in demand, circulating supply is becoming a battleground. This mechanical tension has already been evident in recent weeks, as XRP trading volume has increased while supply on exchanges has decreased. According to market observers, XRP supply on major exchanges has been steadily declining since the first spot XRP ETFs were approved, showing that the pressure on available liquidity is not theoretical but active.
Another aspect of the statement focuses on Ripple’s behavior regarding the release of escrow accounts. Despite unlocking a billion XRP every month, Ripple has repeatedly placed approximately 700 to 800 million of these unlocked tokens back into escrow. Ripple only releases what it deems necessary to maintain healthy liquidity in the ecosystem, and the company has avoided significant selling pressure since the ETF approvals.
According to Pumpius, this means that the ecosystem operates in a controlled equilibrium, with ETF issuers absorbing a growing share of circulating supply, while Ripple keeps escrow issuance extremely conservative. The result is a slow tightening of supply that occurs behind the scenes and may not yet be reflected in price action, but may ultimately lead to a structural supply shock.
In addition to these developments, Ripple has made several advances that could strengthen XRP’s long-term position. A recent example is the formal recognition of RLUSD as a fiat-referenced token by the Abu Dhabi financial regulator.
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