Can Ripple’s UK move overcome XRP’s static on-chain activity?

The XRP market has opened 2026 by splitting into two distinct realities.

On one side, the institutional “wrapper” trade is thriving, supported by shrinking exchange supply and deepening corporate infrastructure. On the other hand, the underlying on-chain economy is flashing warning signs, with activity metrics fading even as Wall Street deepens its footprint.

This divergence has created a complex investment landscape where financial demand for XRP is decoupling from the utility of the XRP Ledger (XRPL).

While the asset itself enjoys a favorable supply setup and regulatory clarity, the network that supports it is struggling to retain liquidity and users.

This has resulted in a market defined by mixed signals of a potential supply shock clashing with a hollowed-out on-chain economy.

The bull case

The strongest argument for XRP in early 2026 is structural.

While price action often dominates headlines, the plumbing of the market suggests a tightening supply backdrop that favors bulls.

The most immediate catalyst is the sheer volume of capital absorbed by spot ETFs. Since the debut of the first US spot XRP ETF in November 2025, the complex has pulled in roughly $1.3 billion in cumulative inflows.

This initial phase functioned exactly as proponents hoped: a regulated vacuum that cleaned up floating supply and signaled that “new money” had arrived.

On-chain data from CryptoQuant indicates that XRP holdings on Binance have dropped to 2.6 billion tokens, the lowest recorded balance since January 2024.

This decline from a peak of nearly 3.25 billion in late 2025 represents a massive removal of immediate sell-side liquidity.

When exchange reserves plummet, it typically signals that investors are moving assets into self-custody or cold storage, effectively entering a “HODL” mode.

Notably, the tightening is mirrored on South Korean exchanges like Upbit, which is a critical hub for XRP liquidity.

Outflows from Upbit have begun to accelerate, mimicking a pattern seen in November 2024 when similar movements preceded a rally from $0.50 to $3.29.

At the same time, whale behavior reinforces the scarcity thesis.

Data from CryptoQuant shows that whale flows to Binance have declined steadily since peaking in mid-December. While large holders still account for about 60.3% of total flows, that figure is down from over 70% just weeks ago.

The reduction in whale deposits suggests that the largest players are finished with their immediate distribution phase and may be positioning for re-accumulation.

Beyond market structure, the ecosystem is laying genuine institutional rails across three continents.

In the UK, Ripple has formally expanded its operational footprint, signaling a move to entrench itself in London’s financial infrastructure just as regulatory clarity there improves. This is particularly noteworthy, given that nearly 90% of crypto firms fail to meet the UK’s FCA registration requirements.

This complements a similar push in Japan, where the Asia Web3 Alliance Japan recently launched a program to support startups building compliant solutions on the XRPL.

Ripple-backed Evernorth Holdings announced a strategic collaboration with Doppler Finance to enhance treasury management and institutional liquidity on the XRPL.

Unlike retail-focused updates, this partnership targets the heavy machinery of traditional finance, aiming to build the infrastructure necessary for large-scale capital to live on-chain.

The bear case

If the supply dynamics look robust, the demand profile for the actual network is flashing red. The fundamental bear case is that XRP is becoming a “paper” asset, traded heavily in derivatives and ETFs, but rarely used on its native ledger.

The first crack in the institutional narrative appeared on Jan. 7, when the spot ETF complex registered $40.8 million in net outflows, ending a long streak of creations.

This reversal matters because it confirms that ETF demand is not a permanent bid; it is a two-way valve that can amplify selling pressure just as easily as it fueled the rally.

More concerning is the dominance of derivatives over spot markets.

CoinGlass data from early January shows XRP open interest at approximately $4.5 billion, which is the highest level since the Oct. 10 incident that wiped nearly $20 billion from the crypto market.

This situation is exacerbated by the fact that XRP 24-hour futures volume has also risen sharply since the beginning of the year, reaching a peak of more than $13 billion. In contrast, spot volume lagged at around $3 billion.

When futures volume dwarfs spot activity by this magnitude, price discovery becomes a function of leverage, liquidations, funding rates, and hedging, rather than organic adoption. This structure leaves the token vulnerable to violent “risk-off” unwinds that have little to do with the project’s long-term value.

Beneath the trading layer, the XRPL’s on-chain vital signs are weak.

DefiLlama data places the network’s Total Value Locked (TVL) at a meager $72.76 million, a fraction of the liquidity seen on rival high-throughput chains.

Even more damning is the income statement: the network generates roughly $1,000 per day in fees. While low fees are a selling point for payments, they also mean the network is failing to capture economic value from its activity.

Moreover, the blockchain network’s usage metrics are actively retreating.

The XRPL decentralized exchange (DEX) recorded daily volumes of just $86,000 in early January, with 7-day volume down roughly 53% to $425,000.

XPMarket’s monthly stats confirm the trend: active traders on the DEX fell from roughly 27,900 in November to 16,700 in December, while volume collapsed from $259.3 million to $166.2 million.

Moreover, even the bright spot of stablecoins comes with a caveat.

While the XRPL stablecoin market cap rose 33% week-over-week to $406 million, driven by RLUSD, the wider liquidity picture is fragmented.

The overall market cap for RLUSD is $1.336 billion, indicating that the vast majority of the token’s supply resides on Ethereum rather than XRPL.

This suggests that while Ripple’s products are gaining traction, they are doing so on competitor chains where DeFi liquidity is already established, leaving the XRPL itself as a secondary settlement rail.

What does this mean for XRP?

The divergence between these two realities defines the narrative for 2026.

XRP is currently trading as a macro-sensitive, institutionally wrapped financial instrument, decoupled from the health of its own ecosystem.

The “mixed signals” are structural. On the one hand, the supply shock from shrinking exchange reserves and the maturation of ETF products creates a high floor for asset prices.

On the other, the hollowing out of DEX volumes and the migration of stablecoin liquidity to Ethereum exposes a failure to convert financial interest into on-chain retention.

So, the year ahead will likely be decided by whether this gap can be bridged. If RLUSD and partnerships like the Evernorth-Doppler collaboration can force liquidity back onto the XRPL, the network may finally justify its valuation with fundamental activity.

However, if the “wrapper” trade continues to thrive while the chain remains empty, XRP risks becoming a speculative vehicle for Wall Street.