Early XRP Investors Sell-Offs Keep Price Low, Here’s How They’re Doing It

Overview

XRP’s price has remained relatively low despite ongoing activity around the asset. Recent insights shed light on why this disconnect exists, emphasizing structural factors influencing the market supply of XRP rather than the typical factors such as retail behavior or escrow releases by Ripple.

Understanding the Current Situation

According to Jake Claver, CEO of Digital Ascension Group, the primary reason for XRP’s restrained price lies in the methods used by early investors and institutions to sell their holdings. Claver highlights that large XRP transactions are increasingly occurring through institutional channels, specifically over-the-counter (OTC) trades and dark pools. These transactions take place away from public exchanges, which helps to prevent immediate price fluctuations typically associated with significant sell orders on open order books.

Platforms like FalconX and Kraken’s dark pool infrastructure serve as venues for these transactions. They cater to institutions, hedge funds, and early investors who prefer to execute large trades discreetly. Such a method allows for substantial amounts of XRP to change hands without causing a visible impact on market prices, maintaining the stability of the asset’s chart.

This selling strategy is particularly advantageous for early investors who accumulated XRP at lower prices in previous years. By utilizing OTC desks, they can gradually exit or rebalance their positions without compromising execution quality. However, this approach creates a disconnect in the broader market. While demand for XRP may be present, the consistent supply released through private channels limits upward price momentum. Consequently, XRP struggles to gain traction even amid positive sentiment or favorable narratives surrounding the network.

ETF Activity and Its Role

An important aspect of this situation is the role of exchange-traded funds (ETFs) in the market. Claver noted that ETFs are actively depleting available XRP liquidity. Unlike typical trading on public exchanges, ETFs do not buy XRP in a manner that disturbs prices; instead, they source their liquidity through the same OTC desks that early investors use for selling. This means that as ETFs absorb XRP, the asset that would otherwise be quietly distributed becomes less available.

The dynamic between ETFs and early investors is critical for understanding XRP’s market structure. As institutional products like ETFs continue to draw down inventories from OTC channels, early investors will face fewer opportunities to sell large positions without impacting public markets. This shift indicates that when OTC supply tightens significantly, the visibility of selling activity will increase, leading to a potential change in price discovery. Until this occurs, XRP’s price may remain constrained despite ongoing demand.

From author

The current landscape for XRP reflects a complex interplay between institutional selling methods and demand dynamics. The use of OTC trades and dark pools by early investors creates an environment where supply is consistently available without immediate market repercussions. This strategy, while effective for individual investors, poses challenges for the broader market, as it limits the asset’s ability to capitalize on positive sentiment.

Understanding these structural factors is crucial for anyone looking to navigate the XRP market. The influence of ETFs further complicates this scenario, indicating a shift in liquidity that could eventually lead to a more volatile price environment as selling becomes more visible.

Impact on the crypto market

• XRP’s price remains low due to structural selling methods employed by early investors.
• OTC trades and dark pools help prevent immediate price fluctuations from large sell orders.
• The presence of ETFs is actively depleting available liquidity in the market.
• A disconnect exists between demand for XRP and the consistent supply from private channels.
• Future visibility of selling activity may lead to changes in price discovery as OTC supply tightens.
• Overall market dynamics could shift if early investors are forced to sell on public exchanges.