After $1.9 Billion XRP Sell-Off, Why Are Institutions Scooping Up Spot ETFs?

▲ XRP / ChatGPT-generated image ©

Amid extreme market fear, XRP (Ripple) is signaling capitulation after recording its largest realized losses since 2022. However, in sharp contrast, funds have flowed into regulated spot exchange-traded fund (ETF) markets for three consecutive weeks, highlighting a stark divergence between institutions and retail investors.

According to Trading News on February 23 (local time), price action in the spot market and ETF channels is clearly diverging. XRP fell to around $1.38, posting record realized losses worth billions of dollars. Given that a previous loss of $1.93 billion was followed by a 114% surge over the next eight months, analysts interpret this as a structural capitulation signal rather than mere noise. Meanwhile, U.S.-listed spot XRP ETFs recorded $1.84 million in inflows last week, marking three straight weeks of net inflows, in contrast to Bitcoin, which experienced outflows exceeding $300 million.

U.S.-listed funds XRPI and XRPR have suffered significant declines amid macroeconomic headwinds. Nasdaq-listed XRPI fell 4.32% in a single day to close at $7.75, down more than 65% from its 52-week high. XRPR, traded on the relatively less liquid BATS exchange, also dropped 4.81% to $11.09. While this reflects typical risk-off selling that erased gains from a recent relief rally, both funds continue to hold firmly above their cycle lows of $6.50 and $9.50, respectively.

Notably, capital rotation within the ETF ecosystem is underway. Bitwise’s XRP fund saw inflows of $2.52 million, and Franklin Templeton’s product attracted $1.52 million, while Grayscale’s existing closed-end product experienced $2.2 million in outflows. This suggests that capital is not leaving the market but shifting toward lower-fee, spot-based products. At the same time, a major institution managing $870 billion in assets has been heavily accumulating spot Bitcoin ETFs while purchasing put options on Canary Capital’s spot XRP ETF, indicating a split within traditional finance between hedging short-term XRP volatility and positioning for long-term upside.

XRP’s short-term struggles stem from macroeconomic pressures, including threats of sweeping tariffs under the Trump administration and concerns over delayed rate cuts. Additionally, warnings have emerged that a narrowing interest rate gap between the U.S. and Japan—driven by the Bank of Japan’s hawkish stance—could trigger a large-scale unwinding of yen carry trades, draining market liquidity. However, if the cryptocurrency market structure bill currently under discussion in Congress is passed, XRP’s utility and institutional status could be solidified, potentially serving as a powerful catalyst to drive explosive ETF demand.

From a technical perspective, XRP remains in a short-term bearish structure, trading below its 50-day exponential moving average of $1.66 and its 200-day EMA of $2.09. If risk-off sentiment intensifies, the price could slide toward $1.12 and potentially test the psychological support level of $1.00. Nevertheless, in the medium term, continued ETF inflows and legislative progress could support a recovery toward the $2.00–$2.50 range. As a result, analysts suggest a phased buying strategy that accounts for potential short-term declines rather than aggressive accumulation of XRPI at $7.75 and XRPR at $11.09.

Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses resulting from its use. The information should be interpreted for informational purposes only.