XRP Supply Shock in Slow Motion

A quiet revolution may be underway in the XRP market—one that could fundamentally reshape how much of the token remains available for cross-border payments. The buzz isn’t just about price, but about how increasingly large chunks of XRP are being locked away in ETFs.

Zach Rector, speaking in a video clip shared on X, said:

“Slowly, slowly, then all of a sudden, people are going to realize that there’s way less XRP available for cross-border payments than they’ve been thinking. When Brad Garlinghouse talks about taking 14 % of SWIFT’s activity, well, the XRP that’s getting parked in these ETFs cannot be used for cross-border payments or liquidity anywhere.”

He sees this emerging scarcity as a “supply shock in slow motion.”

The ETF Drain

The first U.S. spot XRP ETF by Bitwise, trading under the ticker XRP, recently launched on the NYSE. This means real XRP tokens are being held in long-term, regulated custody.

At the same time, Canary Capital’s XRPC ETF posted around $58–$59 million on its debut—outpacing other ETFs launched this year. On top of that, it pulled in about $245 million in net inflows on day one.

Every token that goes into these ETF vaults is effectively removed from circulation. That means less XRP left for payments networks or liquidity purposes.

Impact on Payments Liquidity

Historically, XRP’s strength has been its use in Ripple’s cross-border payment systems—acting as on-demand liquidity. But once XRP is parked in ETFs, it can no longer serve that utility. The accumulation into institutional products erodes the pool of XRP that was assumed to fuel settlement flows.

Rector argues that this shift is not yet fully appreciated. The more XRP moves into investment vehicles, the less remains available for its original purpose.

Market Disconnection and Investor Behavior

Despite the strong ETF inflows, XRP’s spot price has not surged dramatically. Indeed, it fell around 8% even as Canary’s ETF made a splash. That disconnect reflects a basic tension: ETF flows are real, but they don’t immediately translate into token removal from public exchanges or liquidity networks.

Retail traders are watching price swings. Institutions, on the other hand, seem focused on accumulation. As Rector puts it, “Retail is distracted by today’s price going down. Institutions couldn’t care less. In fact, they’re actually jumping on this opportunity to load up on XRP.”

The Tipping Point

Why does Rector call this a “slow-motion” supply shock? Because the underlying change is gradual yet powerful. Each ETF inflow may seem incremental, but the combined effect could significantly shrink the effective circulating supply of XRP usable for payments.

If this trend continues, the long-assumed “liquidity pool” of XRP could tighten dramatically. When the broader market realizes just how restricted the usable supply has become, the re-pricing could accelerate sharply.

Strategic Insight

For those watching XRP’s future, the key lies not just in the price today but in how supply is being reallocated. Institutional vehicles are quietly absorbing XRP, shifting it from a payments asset into a long-term investment. That transition may usher in a structural shortage for cross-border use, even if it plays out in slow motion.

In short: don’t just watch the ticker—watch where the XRP is going, and what it’s no longer doing.