ETFs Have Few Options to Buy XRP – Analyst Says Escrow Is Off the Table

The debate surrounding XRP's truly available supply has intensified this week, driven by analyst concerns about whether there is sufficient liquid XRP to satisfy the growing demand from Exchange Traded Funds (ETFs).

This discussion was notably amplified by comments highlighted by TheCryptoBasic, where market analyst Dean Rector expressed skepticism regarding the commonly cited "60 billion circulating supply." Rector suggests that the actual amount of XRP readily available for trading might be considerably lower.

Rector observed that XRP ETFs have already accumulated over 300 million XRP. This figure carries significant weight when considering the substantial portion of the total supply that is locked in escrow, held for long-term investment, or currently residing in exchange reserves.

He further posited that the effective liquid float could potentially be less than 10 billion XRP. This estimate has prompted a flurry of responses from the XRP community, with some projecting that retail investors collectively hold approximately 3 billion XRP, while major exchanges might possess between 5 and 10 billion XRP. The liquidity available through Over-The-Counter (OTC) and dark pools remains an unknown factor, with the depth of this supply being uncertain.

Despite the varying estimations, a consensus has emerged: the liquid supply that ETFs can realistically access falls far short of the figures presented by supply trackers. This reality immediately brings into question where future ETF issuers will source XRP once traditional liquidity channels begin to contract.

Ripple’s Escrow is Not an Option for ETFs

Adding further context to the ongoing discussion, Chad Steingraber emphasized the reasons why ETF issuers cannot directly acquire XRP from Ripple's substantial escrow holdings.

The restriction stems from the 2023 Ripple–SEC ruling. The court determined that Ripple's direct institutional sales, conducted under contracts, constituted unregistered securities offerings. While programmatic sales on exchanges were deemed permissible, institutional deals remain subject to significant limitations.

Although Ripple was granted a specific waiver that allows it to raise capital privately from accredited investors, this authorization does not extend to selling XRP directly to ETFs. Consequently, Ripple's 34.7 billion XRP held in escrow, in addition to the 5 billion XRP it holds internally, are effectively unavailable for ETF acquisition.

Why Analysts Anticipate a Supply Crunch

Given that ETFs cannot access Ripple's reserves, their practical acquisition options are limited to major exchanges, remaining OTC and dark pool liquidity, and standard secondary market sellers.

Analysts indicate that this acquisition funnel is already constricting. Jake Claver noted that ETFs are depleting OTC and dark pool supply at a rate exceeding expectations. He estimates that only 1 to 2 billion XRP were privately available when the ETFs were initially launched.

As ETF demand continues to rise and the liquid float diminishes, the possibility of a supply shock is becoming increasingly difficult to disregard. Claver has even cautioned that XRP could experience "crazy" price action if this trend persists.

For the time being, the XRP community is closely observing the market dynamics to ascertain how rapidly ETF demand will impact liquidity and whether the long-discussed supply crunch will materialize.