XRP price action has turned fragile again. After failing to hold the $2.00 support level, XRP is now trading around $1.90. The breakdown came despite continued positive headlines on the institutional side, which has left many traders confused.
The disconnect becomes easier to understand when looking at how XRP ETFs are changing market structure.
What you'll learn 👉
ETF Inflows Are Quietly Removing XRP From Circulation
Brad Garlinghouse shared that XRP spot ETFs have recorded 30 straight days of net inflows. That flow matters more than many realize.
Every dollar moving into an ETF pulls XRP out of circulation and locks it inside custodial accounts controlled by fund managers. Those tokens are not sitting on exchanges. They are not being traded by bots. They are not providing liquidity during volatile sessions.
As ETF volumes grow, available supply on crypto exchanges shrinks. That naturally reduces depth in order books and lowers overall spot volume. When liquidity thins out, price becomes easier to push around in the short term.
This is not bullish or bearish by default. It is structural.
Why Lower Liquidity Can Increase Volatility
With fewer tokens available on exchanges, price reacts more sharply to relatively small trades. That is exactly the environment where short-term volatility tends to rise.
Bigger ETF volumes means more XRP locked up in fund managers custody account.
— Vincent Van Code (@vincent_vancode) December 16, 2025
That means less XRP on exchanges, less bot activity, less volume, and GREATER RISK OF SHORT TERM VOLATILITY. due to easy price manipulation.
But here is my prediction: eventually the manipulators and… https://t.co/6Vm6VwnnHj
Bot-driven strategies thrive on deep liquidity and tight spreads. When that liquidity disappears, those systems become less efficient. Sudden wicks, failed support levels, and sharp intraday moves become more common.
The recent loss of the $2.00 level fits this pattern. There was no major negative headline behind the move. Instead, XRP slipped through support in a thin market, where selling pressure did not need to be large to have an effect.
In this setup, price can look weak even while long-term demand quietly builds elsewhere.
The Arbitrage Gap Has Not Closed Yet
One key point raised by analysts is the lack of meaningful arbitrage between XRP ETFs and exchange-listed XRP. In mature ETF markets, arbitrage desks help keep prices aligned by exploiting small discrepancies between spot and fund prices.
That mechanism does not appear to be fully active for XRP yet, at least not at scale. Without it, ETFs can accumulate supply without immediately stabilizing exchange prices.
Once that arbitrage loop becomes active, the structure changes. Liquidity improves, price gaps narrow, and volatility typically falls. That is when ETFs stop distorting short-term price action and start reinforcing stability instead.
Why This May Pressure Bots Before It Helps Price
There is another layer to this transition. As liquidity dries up and price becomes harder to predict, short-term bots and manipulators start taking losses that cannot be easily recovered.
Over time, those players tend to rotate into higher-volume markets where spreads are tighter and execution is more reliable. That migration reduces artificial price noise and leaves a cleaner market behind.
In that sense, the current phase may be a painful adjustment rather than a failure.
Read also: Why XRP Price Isn’t Moving Despite Japan’s Ripple Boost
A Transitional Phase for XRP
XRP losing $2.00 does not invalidate the broader ETF trend. It highlights the tension between short-term market mechanics and long-term capital flows.
Right now, XRP sits in an awkward middle ground. ETFs are absorbing supply, exchanges are losing relevance, and liquidity is fragmented. That combination can produce unstable price action in the near term.
If ETF volumes continue to grow and arbitrage mechanisms mature, the next phase looks very different. Price stability improves, volumes shift toward regulated venues, and institutions gain confidence.
For now, XRP price weakness around $1.90 may say more about market plumbing than about demand.
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