XRP: Panic selling cools as institutions soak up supply – is a rebound forming?
The recent XRP downturn has looked less like a sudden collapse and more like a slow structural unraveling. From its 2025 peak, the token has slid nearly 70%, exposing fragile liquidity and stretched leverage across the market. Yet, beneath the surface, the way supply is moving – from distressed holders to larger, patient buyers – is quietly reshaping the odds of a recovery.
How XRP’s market structure broke down
XRP’s decline did not come out of nowhere. The chart began flashing early warning signs well before the steepest drops:
– Price started printing lower highs, signaling fading bullish momentum.
– Each rebound from support became shallower, more in line with distribution than fresh accumulation.
– Liquidity gradually thinned, while leveraged positions stayed elevated, leaving the market vulnerable.
Once key support zones finally gave way, a chain reaction followed. Stop-loss clusters were triggered, liquidating long positions and forcing overleveraged traders to exit at any price. Large waves of tokens moved on-chain as distressed holders rushed coins onto exchanges, intensifying sell pressure in a short window.
This sequence is typical of late-stage bull cycles morphing into deeper corrections: slow structural weakness, then a violent flush when critical levels break.
Capitulation: the largest loss spike since 2022
The washout in XRP has been brutal from a realized-loss perspective. Losses surged to around 908 million dollars, the largest capitulation spike since the 2022 bottom. That magnitude is less consistent with calm, discretionary portfolio rebalancing and more in line with forced exits:
– Margin calls and liquidations pushed sellers out at inopportune prices.
– Risk controls and automated strategies dumped positions as volatility spiked.
– Open Interest fell sharply as leverage was flushed from the system.
This combination – heavy realized losses plus shrinking Open Interest – often marks a late stage in a downside cycle, where weak hands are pushed out and leverage gets reset.
As retail panics, big wallets step in
Interestingly, the reaction across different types of market participants has been far from uniform.
Short-term traders and smaller holders largely de-risked. Many offloaded positions into the sell-off, contributing to the spike in realized losses and increasing exchange inflows during the worst days of the decline.
At the same time, larger wallets and more sophisticated players appeared to treat this volatility as an opportunity rather than a threat. Whales selectively absorbed liquidity from panicked sellers, accumulating XRP as price fell and sentiment collapsed.
Social mood deteriorated, with discussions increasingly dominated by fear, frustration, and capitulation language. Yet despite that negative backdrop, persistent accumulation by big holders helped limit the depth and duration of the immediate crash.
A historical blueprint: the 2022 capitulation and recovery
The current cycle invites comparison with XRP’s previous major drawdown in 2022. Back then:
– Realized losses peaked near 1.93 billion dollars as price plunged roughly 80% to around 0.30 dollars.
– That phase of extreme selling signaled exhaustion, and over the next eight months XRP climbed about 114% from the lows.
– Volatility gradually compressed as selling pressure faded and speculative excess was worked out of the system.
– Losses steadily declined over a span of four to six months while weaker holders exited, allowing stronger hands to build positions.
Today, XRP is down about 70% from the 2025 high of 3.65 dollars to roughly 1.10 dollars. Realized losses are once again elevated, but the overall market value has not collapsed as sharply as during the 2022 cycle, which saw a roughly 40% contraction in total valuation.
Another key difference: current 30-day volatility is noticeably lower than in 2022, hinting at a more resilient, if still stressed, market structure. This suggests that while pain has been significant, the market may be absorbing it with somewhat greater maturity.
A changed macro landscape: ETFs, regulation, and derivatives
What makes this downturn distinct is the transformed backdrop in which it’s unfolding. Since the previous cycle:
– Exchange-traded products tied to crypto assets have attracted institutional capital and created new channels of demand.
– Regulatory visibility, while still evolving, has improved in several jurisdictions, giving institutions more clarity.
– Derivatives markets have grown deeper and more sophisticated, offering more ways to hedge, speculate, and manage exposure.
These changes cut both ways. On the one hand, institutional presence can cushion panic selling because large players are often willing to accumulate at distressed levels over a longer time horizon. On the other, institutional flows can be methodical rather than explosive. That means environments of heavy capitulation may still lead to recovery, but the rebound could be slower, less dramatic, and more constrained by macro conditions and risk frameworks.
February’s staged decline and emotional capitulation
The latest leg of XRP’s fall, particularly during February, unfolded in clear, traceable stages. Price first dropped sharply by about 24% to around 1.37 dollars, ramping up selling pressure and triggering a wave of reactive behavior:
– As support levels failed, realized losses expanded quickly, reflecting emotional exits rather than rational portfolio rebalancing.
– Short-term holders, especially those who bought near the top, became primary contributors to sell volume.
– Derivative markets amplified moves as liquidations cascaded.
The pattern was unmistakable: it was less a controlled rotation and more a capitulative purge, driven by fear and forced selling.
Whale behavior and exchange reserves: supply quietly tightens
While price action grabbed headlines, an important structural shift happened in the background. Since early 2026, large holders have moved approximately 3.8 billion XRP coins to one major centralized exchange, reflecting sustained deposits from whales during the downtrend.
Yet despite these inflows from big wallets, total exchange reserves have fallen to their lowest levels in five years. This indicates that while whales are active on trading venues, a considerable portion of XRP is simultaneously being withdrawn from exchanges, likely into cold storage or long-term custody.
The result is a tighter liquid float: less readily available supply for immediate sale. When a token’s exchange reserves compress while price is falling, it often signals that long-term holders are quietly positioning for an eventual recovery, even as short-term sentiment remains bearish.
Institutions step in: spot ETFs absorb distressed supply
Under the surface of volatility, institutional demand has shown signs of life. Spot ETF products tied to XRP have been recording regular inflows of around 12.6 million XRP per week. These vehicles are designed for slower, more deliberate allocation, and yet they are consistently absorbing coins that distressed holders are dumping.
This dynamic plays a critical role in stabilizing a shaken market:
– Forced sellers create supply overhang in the short term.
– Institutional products gradually soak up that supply, reducing the pressure on spot markets.
– As the balance shifts, the intensity of each additional sell wave diminishes.
While ETF flows are not explosive, their persistence can act as a structural anchor, particularly during periods of extreme fear.
Sentiment: extreme fear, persistent negativity, but waning leverage
From a sentiment standpoint, conditions have been firmly in the “capitulation zone.” The Fear and Greed Index dropped to 9, a level historically associated with extreme fear and late-stage selling events in many crypto cycles.
Concurrently:
– Funding rates remained negative for 12 consecutive days, signaling that traders were willing to pay a premium to remain short.
– Bearish narratives dominated discussions, with little appetite for risk-on exposure.
– Open Interest damage indicated a broad reduction in leveraged bets on both sides, a necessary cleansing after a protracted speculative build-up.
Such conditions do not guarantee a bottom, but they often precede phases where the asymmetry of risk and reward becomes more attractive for contrarian or long-term participants.
What needs to happen for a sustainable XRP recovery?
For XRP to transition from mere stabilization to a genuine, sustainable recovery, several key elements need to align:
1. Declining realized losses
Loss magnitudes need to ease, indicating that capitulation is behind the market and that selling is no longer driven by desperation.
2. Continued reduction of exchange balances
Ongoing withdrawals from trading platforms would further tighten available supply, supporting price when demand returns.
3. Rebuilding Open Interest in a healthier way
The next wave of leverage must grow slowly and organically, rather than through aggressive speculative mania. Controlled growth in derivatives is far more constructive than a sudden rush back into high-risk positions.
4. Stabilizing volatility
A narrowing of daily price swings typically accompanies consolidation phases, creating a base from which more durable uptrends can form.
5. Supportive macro and regulatory backdrop
Clearer regulation, steady institutional flows, and a cooperative macro environment can all help validate any nascent XRP recovery and reduce the odds of another abruptly destabilizing shock.
Can XRP replicate its 2022 rebound – or will this cycle look different?
Historical precedent suggests that deep capitulation often sets the stage for powerful recoveries. In 2022, once the worst of the selling was absorbed, XRP rallied more than 100% over several months.
However, this cycle may not be a carbon copy:
– Institutional influence could dampen volatility and compress the scale of any rebound, leading to a more muted yet steadier climb.
– The broader crypto environment, including other large-cap assets and macro risk appetite, will heavily influence XRP’s trajectory.
– Regulatory decisions and developments around major market venues could either accelerate or delay any recovery.
That said, the core ingredients seen in past recovery phases are starting to appear again: intense realized losses, extreme fear, leveraged washouts, whale accumulation, lower exchange reserves, and consistent institutional absorption.
If these trends persist and no new systemic shock emerges, the groundwork for an eventual XRP recovery may already be forming – not through euphoric speculation, but through slow redistribution from panicked sellers to patient, well-capitalized buyers.
Risk considerations for traders and investors
Despite the improving structural signals, XRP remains a high-risk, high-volatility asset:
– Prices can overshoot to both the downside and the upside, especially during periods of thin liquidity.
– Historical patterns provide context, not guarantees; past recoveries do not ensure similar outcomes in the future.
– Short-term trading around capitulation events can be particularly dangerous, as intraday swings may be violent and unpredictable.
Participants considering exposure should carefully evaluate their risk tolerance, time horizon, and portfolio diversification, and be prepared for extended drawdowns or prolonged consolidation periods.
Final takeaway
XRP’s recent downturn has pushed the market through one of its most intense loss events since 2022. Yet, instead of signaling the end of the asset’s story, the latest capitulation phase may be accelerating a transfer of supply from reactive sellers to more deliberate, long-term holders and institutions.
Panic selling appears to be easing, leverage has been flushed, and structural metrics – from exchange reserves to ETF inflows – suggest a market gradually maturing through pain. Whether XRP can convert this structural reset into a sustained recovery will depend not only on on-chain and derivatives data, but also on broader risk sentiment and regulatory clarity in the months ahead.
This analysis is informational only and should not be interpreted as financial or investment advice. Trading, buying, or selling cryptocurrencies involves substantial risk, and every participant should conduct independent research and consider personal financial circumstances before making any decisions.