XRP is exhibiting a historic shift in its on-chain supply dynamics, a development that could significantly reshape market behavior. Exchange balances for XRP have experienced a sharp decline, which is a strong indicator of a potential liquidity squeeze.
Chad Steingraber brought attention to this trend on X, noting that data from Glassnode reveals XRP exchange reserves are decoupling from historical price correlations for the first time. XRP balances on exchanges have fallen to approximately 1.6 billion tokens, even as the cryptocurrency trades near the $2 mark. This represents a structural change with substantial implications for market liquidity.
Falling Exchange Balances Signal Tightening Supply
Exchange balances refer to the XRP tokens held on centralized trading platforms, which are readily available for immediate trading. A decrease in these balances suggests that XRP is being accumulated and moved into private wallets or institutional custody.
In the past three weeks alone, nearly 1 billion XRP has been withdrawn from exchanges. This outflow is attributed to factors such as ETF inflows exceeding $874 million, institutional holdings, and sustained retail demand. Consequently, the supply of XRP on exchanges has decreased by 45 percent over the last two months.
This reduction in available supply is tightening the market, thereby limiting the sell-side availability of XRP. As a result, even moderate buying pressure could now potentially trigger amplified price movements.
Glassnode Exchange XRP Balances
The first time that balances (green) are WELL below the price structure (black). https://t.co/hYDBYF6bTxpic.twitter.com/ryHDrSKqG5
— Chad Steingraber (@ChadSteingraber) December 9, 2025
Implications for Liquidity and Market Behavior
A reduction in liquidity on exchanges can lead to the establishment of stronger support levels. With fewer tokens available for sellers to unload quickly, this could potentially stabilize the price during periods of market stress.
Simultaneously, the reduced supply could magnify the effects of buying pressure. Purchases by institutions or retail investors may have an outsized impact on XRP's price, potentially leading to increased volatility and upside potential.
Institutional and Retail Accumulation
ETF inflows and institutional custody are identified as significant drivers behind these withdrawals from exchanges. Large-scale holders are increasingly moving XRP into storage for long-term purposes, indicating a belief in its future value.
Retail investors are also contributing to this trend by withdrawing their XRP holdings to private wallets. This widespread accumulation suggests growing confidence in XRP's underlying fundamentals and may be setting the stage for future upward price movements.
Risks and Market Fragility
Despite the tightening supply, structural risks within the market persist. On-chain data indicates that approximately 41.5 percent of the total XRP supply is currently held at a loss. These holders might be inclined to sell if prices experience further declines, which could reignite volatility.
Furthermore, macroeconomic factors or broader market-wide pressures could still impact XRP's performance. A low supply on exchanges, by itself, cannot entirely prevent price decreases if overall market sentiment turns negative.
What to Watch Next
Market participants are advised to closely monitor exchange balances, ETF flows, and the movements of large XRP wallets. Continued accumulation of XRP off exchanges could lead to even lower liquidity levels.
Price support levels and sentiment indicators will also be critical factors to observe. A combination of constrained supply and robust demand could create conditions conducive to a significant upward price movement for XRP.
In conclusion, Glassnode data, as highlighted by Chad Steingraber, reveals that XRP exchange balances have fallen below historical price correlations for the first time. This development signals a tightening market and suggests a potential supply squeeze is underway.
The ongoing ETF inflows, institutional holdings, and retail accumulation are continuing to reduce the amount of XRP available on exchanges. While this dynamic has the potential to fuel upward price momentum, the substantial portion of XRP held at a loss serves as a reminder that structural risks remain. Close attention to supply trends and market sentiment will be crucial in assessing XRP's future price movements.