XRP Supply Shock Narrative Gains Traction, But Analysts Call It Overblown
Is a supply crunch coming for XRP? The narrative's gaining steam, but not everyone's buying it.
The Bull Case: Scarcity as a Catalyst
Proponents point to a simple equation: dwindling exchange reserves plus rising institutional demand equals potential price pressure. The theory hinges on large holders moving tokens off exchanges into cold storage, effectively taking them out of the immediate selling pool. It's a classic crypto playbook—constrict the available supply and wait for the market to notice.
The Skeptical Take: Reality Check
Analysts are pushing back, labeling the hype as premature. They argue the data doesn't yet support a true 'shock.' While on-exchange supply has dipped, the overall circulating volume remains massive. The move could simply reflect a shift in custody strategy, not a coordinated buy-and-hold. One quipped it's less about a supply shock and more about 'supply shuffle'—the kind of financial musical chairs that keeps traders on their toes and fees flowing.
Market Mechanics vs. Market Hype
The debate cuts to the core of crypto valuation. Does technical scarcity alone drive price, or does utility and adoption matter more? For every chart predicting a squeeze, another shows ample liquidity waiting in the wings. It's a tug-of-war between on-chain metrics and trader psychology.
Remember: In crypto, a compelling narrative can sometimes move markets faster than actual fundamentals—at least until the next quarterly report, or lack thereof.
Several individuals raise concerns about XRP’s decline in supply
Morgan shared an X post dated Monday, December 29, saying: “I have criticized the supply shock theory just as I did with the silly Ripple escrow dump theory. Neither of these theories provides significant insight into understanding xrp price movements. What really matters is what Bitcoin’s price is doing; that’s the key factor.”
He made these remarks at a time when a reliable source had published reports of a drastic decline in the amount of XRP available on exchanges. The report noted that the supply decreased by about 1.5 billion tokens.
Feedback from the crypto community and analysts suggests a common factor behind this drop. They argued that the decrease may be connected to shifting market sentiment among investors, as significant holders appear to be moving their tokens to centralized exchanges (CEXs), probably for long-term storage.
Meanwhile, apart from Morgan, the XRPL dUNL validator, VET, also disagreed with the crypto community’s argument that the supply of XRP on exchanges has declined. According to VET, the supply is abundant, citing recent reports that declare the total supply of the Ripple token available on exchanges to be approximately 16 billion.
After this argument was displayed, sources concluded that the tweet stressed the flexible nature of XRP liquidity. It also noted how varying it can be, adding that, “If the price rises or falls, anyone without XRP on exchanges can send theirs in just 3-4 seconds. Therefore, the token listed for sale on order books is also dynamic. It can quickly increase or decrease in volume.”
Analysts observed that a $10 million purchase occasionally had the potential to boost the price, resulting in a rise. At other times, reports noted that a $100 million purchase might struggle to prevent the price from declining.
However, even with this argument in place, several individuals still raise concerns about the possibility of an XRP supply shock and its impact on the price of the Ripple token. Recent feedback suggests that the increasing interest in XRP ETFs is a factor contributing to this situation.
The possibility of an XRP supply shock sparks tension in the ecosystem
Established in November 2025, the XRP ETF has drawn significant attention from investors, with more than $1.25 billion in net assets collected. As a result, fewer tokens have been left on exchanges for direct trading.
Following this finding, a prominent crypto commentator on the X platform with the username unknownDLT weighs in on the matter. The individual acknowledged that XRP ETFs are acquiring the existing Ripple token supply at a faster and increasing pace. This claim has therefore prompted the analyst to believe in the possibility of an XRP supply shock sooner than anticipated, with recent reports indicating a substantial 750 million token absorption.
Experts, on the other hand, stated that this is the perfect time for a considerable surge in the prices of XRP. They asserted that this can be achieved because of the connection between a drop in supply and an increase in demand.
In the meantime, analysts predict that the value of the crypto will substantially increase, despite the current situation in which exchanges face hardships and buyers in the market begin to collect the insufficient supply. Moreover, reports indicate that the ongoing investment in ETFs may help alleviate the aggressive selling pressure exerted on the Ripple token, sparking hope in the cryptocurrency ecosystem.
Don’t just read crypto news. Understand it. Subscribe to our newsletter. It's free.
