Analyst Says Guess What Happens When Exchanges Run Out of XRP as XRP Balances Drop 1B in 3 Weeks

XRP is disappearing from exchanges in large amounts, with a staggering 1 billion tokens withdrawn in the past three weeks.

Notably, Market commentator Mike elaborated on this Glassnode data in a recent tweet, calling it “insane.” He highlighted that the XRP balance across all exchanges has dropped drastically, as whales prefer self-custody for long-term holding.

XRP Availability on Exchanges Depletes

Specifically, the Glassnode data show that over 3.5 billion XRP tokens were on exchanges in early November. This number stood at 4 billion tokens in October, growing as the asset’s price struggled.

However, a sharp drop was seen in November, as exchange reserves depleted by 2 billion from over 3.5 billion to near 1.5 billion. Mike noted that whales took off 1 billion tokens in three weeks, reducing the number of XRP available for immediate selling. Notably, this coincides with the launch of the US XRP spot ETFs.

Meanwhile, game designer Chad Steingraber reacted to this development, noting that this was the first time the cryptocurrency’s exchange reserve balance had dropped well below the price structure. Notably, the one-year chart, which compares the exchange balance with price, shows that XRP’s price has largely trended above the reserve trendline.

However, recent withdrawals have ensured that for the first time this year, the exchange reserve has dropped below the price trend. This trend shows severe supply absorption, which usually precedes a price rally.

Withdrawals Spark Supply Shock Narrative

Remarkably, Mike views this as bullish for XRP. He painted a scenario in which the pent-up demand for the coin triggers a shortage across major suppliers.

Notably, most of the recent demand has come from ETFs, which became the fastest US products to cross $1 billion in assets under management after Ethereum and Bitcoin. Data from SoSoValue shows the funds have recorded a cumulative net inflow of $944 million from four asset managers.

Mike suggested that these ETF demands, institutional acquisitions, the asset’s use case, and XRP burns, among others, will dry up XRP’s supply. This would make them inaccessible to exchanges, OTC desks, and “dark pools.”

This view aligns with the growing community sentiment that an XRP supply shock is imminent. Analyst Pumpius highlighted six reasons why XRP would become scarce in a recent outlook, also mentioning most of these factors. EasyA co-founder Phil Kwok further shares the same sentiment, tapping DeFi to spark this scarcity.

Meanwhile, Mike suggested that this shock would have bullish impact on XRP’s price. He asked whether XRP would still retrace further, as some suggest, if a use case is sustaining its price.